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Thursday, November 11, 2010

De Beers

Because I am located in a somewhat intelligent part of the country (you know, MIT, Harvard and a plethora of other universities are located here) I have, over the years, had to listen to a lot of (mis)information about diamonds over the years. The biggest complaint I have had to deal with is that diamonds are not really worth what they cost. And the reasoning behind this is that one company, DeBeers, controlled the market entirely through the stockpiling of diamonds over the years and that the price was completely controlled and not based on a fair market system. Well since 2001 DeBeers has steadily divested itself of this role, through a systematic, planned and controlled reduction in the amount of the market they controlled and a complete elimination of the stockpiles they held, those held ostensibly in an attempt to support the market (from the complainers standpoint). It currently controls approximately only 30% of the total production of diamonds worldwide. And yet, except for a slight dip in prices in 2009 due to the worldwide economic crisis, the price of diamonds have continued to rise, especially for higher quality goods. So the question comes to mind, why, if the price was not real, are they still going up in value?

Did you know that almost 1 ton of rock must be mined in order to produce 1 ct. (1/5 of a gram) of diamonds? Then the production has to be hand sorted (there are no computers that can do this) to the different quality levels. After this the material has to be sold to cutting centers (most now located either in the countries where the mining is taking place or countries such as India which are only recently stepping up from third world countries) and hand cut (often, although the Israelis have pioneered a large amount of computerized cutting), then sold to wholesalers who must then move the material to manufacturers or retailers. Let's also not forget that HIGH quality stones (like I sell, only top color D-E-F color and top clarity VS clarity or better) are actually in short supply (or being bought rampantly by the exploding Asian countries).

So the next time you're thinking of complaining that diamond prices aren't justified, think about what goes into getting those sparkly little things onto your fingers. Of course you could always opt out of diamonds and get some of those amazing purple sapphires I love to sell which will always be less expensive than diamonds.

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