Why Are Diamonds So Valuable

At Diamond Exchange we talk about diamonds a lot. You might say that we live and breathe diamonds. Let’s be clear; we are definitely not recommending diamonds as nutritional supplements or to assist with respiratory issues! Although we have heard of diamond rings being accidentally swallowed before; the old surprise diamond engagement ring in the glass of champagne trick – gone not quite according to plan! And there are also a few stories of diamonds being ingested deliberately, but those stories are probably for another day. Today we are talking about why diamonds are so valuable. We often have this discussion with customers, so thought it would be a good idea to post about it here.

We need to monitor the world price and value diamonds every day. Our directors and specialists are all FGAA. This stands for Fellow of the Gemmological Institute of Australia. Attaining this fellowship takes years of learning, studying and dedication. Ultimately there is a rigorous examination process which must be completed successfully, and then applicants are awarded entry to this eminently respected institution. Training on the job and within the wider industry is also important in order to become a specialist or expert, and particularly when it comes to valuing diamonds and other jewellery.

Diamond Exchange is an Australian family business and our family has been involved in the diamond industry for over 120 years. Some of us grew up looking at and learning all about diamonds and jewellery from a young age. We have been taught all about the value of precious gemstones by our mothers and fathers and previous generations of jewellers. And by ‘value’, we don’t just mean in terms of dollars. Diamonds, engagement rings, wedding rings and all the wonderful and beautiful pieces of jewellery out there are incredibly valuable as symbolic, significant and sentimental objects as well.

Diamonds are highly valuable, or expensive. We prefer the term valuable. Why is this?

DIAMONDS ARE RARE

Diamonds are amongst the rarest commodities on this planet. Every year, the supply of diamonds is decreasing, globally. The fact that our own Argyle mine in Australia’s remote North-West has been recently permanently closed is mostly due to the fact that the mining company estimated that they had unearthed just about everything that there was to be discovered at the site. There were other factors involved, and now the land has been returned to its traditional owners; the outcome for everyone involved is good – especially if you own one or more of the famous, prized pink diamonds from Argyle.

But we digress; the point was that this mine was one of the most productive in the world. There are industry expectations that similar closures will occur around many of the world’s largest and most productive mines in the next decade. In 2006, production globally was at its zenith, and from then on fewer diamonds have been unearthed each year, incrementally.

Will we discover new locations to mine diamonds? It’s possible; there are lots of folks looking but not a lot of eureka moments at this stage. It is possible that there may be sites in the world’s oceans, underneath the sea-beds, which sounds quite exciting – a bit like finding treasure chests lost in old Davey Jones’ locker! But the costs of undersea mining are immense and prohibitive.

Most of the rough diamonds which are unearthed are in fact not of gem quality or are too small (a bit like having to throw that little fish back in). Little dazzlers, which are between .01 and .05 of a carat, represent the majority of stones which are extracted and eventually cut & polished. But the diamonds people really want to see are those which are 1 carat or more. These are the diamonds which feature as centre stones on fabulous diamond engagement rings and other jewellery items. And the really good ones in these sizes are in the minority of diamonds which are mined every year.

So, supply is becoming more difficult, yet demand is increasing! You don’t need a degree in economics to understand what this does to the price of the sparkling stones. Demand has been especially driven by new markets in India and China, where thousands within the relatively recently wealthy middle classes have their eyes on the prize. The United States of America was the largest market for diamonds for most of the last 50 years, but this appears to be changing.

DIFFICULTIES AROUND ACQUIRING DIAMONDS

As discussed, mining is producing less and less of these remarkable rocks, and therefore not only is demand outstripping supply and prices going up, but diamonds are also literally becoming more difficult to lay hands on.

Mines are known as ‘tertiary’ sources for procuring rough diamonds. The ‘primary’ source is actually diamonds which can be found on the earth’s surface. Yes, it’s true, many used to be discovered in this way, but we’re pretty sure there’s not many of these left anymore. The ‘secondary’ source is diamonds which can be found in the beds of rivers, creeks and other waterways. There may be a few yet to be found in these locations but not heaps. As we mentioned above, the next step is undersea mining. And there’s also another possibility – outer space. Both these are called ‘quaternary’ sources. We are not holding our breath waiting for diamonds to be found in these places (although you would potentially need to hold your breath in both, hey?). So, for now, diamonds are becoming harder to come by and even harder to buy the best ones.

THE PERCEPTION OF VALUE

There is of course the element of the nature of ‘value’ itself. People have assigned high value to precious stones and metals, land, yet also pieces of paper, artworks and recently crypto currencies - which are really only an idea. Materials like diamonds and gold have a long, impressive and fascinating history as representations and guarantees of ‘value’. These items are like reserves of wealth, which can be carried around and are accepted as proxy currency everywhere. Peoples around the world have agreed on this, a long time ago. Just as we do with cash. There are many people who would prefer to have gold and/or diamonds in hand rather than an equivalent amount in plastic banknotes. Who can blame them?

So, diamonds are simply inherently valuable too. This is not caused by large corporations or stock markets playing around with figures. It’s deeper than that. It is more akin to the value we place on land and law. The market for diamonds certainly was dominated by one particular player up until around 50 years ago, and that was the company called De Beers. They are still very important within the industry. But no single organisation influences the market in terms of having a monopoly anymore. This means the market is not manipulated the way it once tended to be, somewhat. Competition is fierce; therefore, prices are realistic. In other words, there’s no ‘system’ which the average consumer is up against and has no chance of ‘beating’. It doesn’t work that way, thankfully.

The value of diamonds (and all the precious gems for that matter) is bona fide. Diamonds are costly because of the reasons discussed above, market forces and also, importantly, because of their special and remarkable qualities: Diamonds are beautiful. Seeing a spectacular diamond shimmering or scintillating gives us a sensation like nothing else in the world. They are unique. Diamonds represent the vows, the values and the union of lovers. They are handed down in families. They are ancient, they are eternal and we rightly treasure them.