Why Diamonds Are So Expensive?

What comes to your mind when you think about elegance, purity, and eternal love? For a guess, it is the diamond. Diamonds are not just rare stones found in nature, but they are the ones that shaped the history of human civilization. Since time immemorial diamonds have been the true symbol of romance, wealth, and royalty, defining societies around the globe. The love for diamonds is never ending even if they come with a hefty price tag.

It is common to say that diamonds come with a cost. But why is it so? Why diamonds are so expensive? Why do people want a diamond to be the center stone in their engagement rings? If you also want answers to these questions, then this article will help you quench your thirst.

There are different factors that make a diamond a valuable asset. Its rare presence, complex mining process, expensive marketing campaigns, controlled supply chains, and origin make it a commodity worth buying. In this article, we give attention to all these aspects of the diamond industry and try to understand why “diamonds are forever”

The Origins of Diamond Value

The Rarity of Natural Diamonds

When it comes to natural wonders, diamonds top the list. These natural marvels are obtained from the earth’s crust after intensive drilling. The formation of natural diamonds is a very unique phenomenon, and it takes millions of years for a diamond to take its natural state. It is not only the unmatchable brilliance that makes diamonds so rare but also the extreme natural conditions that are required for their formation.

As per scientific studies, diamond formation requires extremely high pressure and temperature conditions. This kind of intensive temperature and pressure conditions are available deep inside the earth. At 120 km depth, temperature between 9000℃ and 13000℃ and pressure around 45-kilo bar is available, suitable for diamond formation. It is the place where carbon atoms get crystallised due to intense pressure and temperature and take the shape of a diamond.

The pressure and heat conditions present at the depths compel magma to come to the surface of the earth, known as volcanic eruption. Diamonds and magma get transported to the surface where it cools down into ignited rocks with time. These rocks known as kimberlite give rise to the vertical structure inside the earth’s crust known as kimberlite pipes. These are the primary sources of diamonds around the world. However, it is not economically feasible to get diamonds from all the kimberlite pipes present. Only 1% of rocks are economically viable for diamond extraction making it one of the rarest objects on the planet.

Historical Perception and Cultural Value

For centuries, diamonds have fascinated mankind in different ways. Their matchless beauty and captivating brilliance made this unique stone one of the most desirable products in human civilization’s history. In the words of Roman naturalist Pliny, “Diamond is the most valuable, not only of precious stones but of all things in this world.

Different ancient civilizations, such as Hindus, Buddhists, Greeks, and Romans, have unique beliefs about how diamonds form. Some believe that diamonds are a product of lightning bolts striking rocks, and according to some, they are tears of God and have indestructible powers. If we go back to the 8th century, diamonds were seen as a means of invincibility and unvanquishable power. Kings wore diamond-studded leather breasts on the battlefield to achieve victory in the war.

Diamonds had a very significant role in differentiating royalty from common people. These stones are celebrated as one of the most prominent things held by monarchs in any empire across the globe. Whether it was the ruling class or the aristocratic class, everyone admired diamonds for their beauty and timeless elegance. One of the best examples is the Koh-i-Noor, a diamond from India that became the royal symbol for many empires. Its journey began in the 13th century and ended with its British acquisition.

The views of diamonds by the royal class of any society greatly affect the psyche of the common man. They influenced and embedded the perception that diamonds are the true symbol of prominence and exorbitance.

The Four C’s and Quality Factors

Cut, clarity, color, and carat weight are the four cornerstones of a diamond that decide the true value of a diamond in the market.

• The diamond cut represents the quality of a diamond that ultimately impacts the brilliance exhibited by it. Cut is differentiated into different grades representing different levels of precision and skill.
• Diamond clarity showcases the purity of a diamond with fewer or no inclusions. Diamonds with fewer inclusions are expensive.
• Diamond Color helps buyers and sellers in differentiating diamonds as per the kind of brilliance shown by them under light. Colorless diamonds top the list with maximum value and diamonds with yellowish or colored tints are considered less expensive.
• Carat weight represents the actual weight of a diamond. The more the weight, the more the price.
  All these factors together determine the rarity, quality, and appeal of a diamond. These factors play a significant role in ascertaining the price of a diamond in the market. Diamonds with exceptional grades in all the 4 C’s are the most valuable in the market.

Certification and Grading Costs

Certification provided by certain renowned diamond grading agencies like the Gemological Institute of America (GIA), the American Gem Society (AGS), etc helps buyers buy authentic and high-quality diamonds.

The certification increases the price of a diamond in the market. These grading agencies use specialized equipment, laboratories, and a team of experts to grade diamonds. The thorough investigation by these institutions assures buyers about the quality of a diamond, and this is why certified diamonds are more expensive than other diamonds.

Mining and Production Costs

Expensive and Intensive Mining Process

The mining process to obtain a diamond is not an easy game to play. It is both complicated and expensive and requires skilled labor, high-tech machinery, and monumental investment.

Difficulties involved in Diamond excavation:

• Diamonds are present hundreds of meters deep inside the earth’s crust. To mine diamonds, extensive drilling operations are required. Thousands of tons of sand and rocks have to be removed. It is a complicated and expensive exercise.
• Diamond mining is a labor-intensive process. It requires a skilled workforce to conduct different steps involved in extracting a diamond ore. Whether it is excavation, sorting, or any other process, diamond mining needs adept hands.
• Without the help of specialized equipment, the diamond excavation process is not possible. Advanced machines like drilling rigs, crushing systems, hydraulic shovels, etc, are required to complete the mining process.
• There are different kinds of mining processes for obtaining diamonds from the earth’s crust. Deep underground mining or offshore mining is one of those methods which requires consequential investment. Also, the inclusion of safety measures makes this process even more costly.

Processing and Cutting Diamonds

Can you imagine how a rough diamond obtained from an ore turns into an admiring, sparkling diamond? It is the skilled hands that give diamonds their scintillating appearance. Turning diamonds into precious stones requires precision, expertise, and time.

Diamonds are known for their unique structural composition. An expert diamond cutter first analyses the physical and optical aspects of a diamond using sophisticated equipment and pays attention to carat weight and shape. Diamond Cutting requires careful analysis of the internal characteristics of a diamond to get the best out of it.
To obtain optimal sparkle from a diamond, cutters must ensure precise shape and cut. For example, in the case of a round cut, angle and facet alignment need to be balanced to achieve the right kind of brilliance and symmetry. Obtaining precision in diamond cutting requires skilled hands and experience. Even a small mistake can diminish a diamond’s brilliance and its value.

Cutting a diamond into perfect shape is a time-consuming process. It requires proper planning and significant devotion on the part of the cutter. Time consumption depends on the complexity involved in the cutting process, some shapes are easy to cut while some take even months. To provide high brilliance and aesthetic appearance, cutters have to pay more time and caution to the job with no room for error. An expert diamond cutter first plans and analyses each step before getting to the main job to eliminate the possibility of wasting time. It is important to note that an uneven cut or poor execution of cutting techniques may result in the loss of significant value of a diamond.

The fundamental challenge faced by diamond cutters is the loss of diamond weight during the cutting process. According to different assessments, it is found that a polished stone is 50 to 60% lighter than the original stone. The main reason behind weight loss during the cutting process is creating the right facets and symmetry for high brilliance. This may include the removal of blemishes and inclusions for the right clarity and sparkle.

However, loss of weight during the diamond diamond-cutting process does not impact the overall price of a polished diamond. In fact, a polished diamond is more valuable than a rough diamond obtained from an ore. Professional diamond cutters concentrate on maintaining the balance between the right cut and carat weight to achieve high value.

The Role of the Diamond Supply Chain

The Influence of Major Corporations

The diamond industry around the globe is dominated by certain big names like the De Beers, Alrosa (Russia’s state-owned diamond mining company), Rio Tinto, etc. These big players who own the power to influence the market strategize the diamond industry. Whether it is supply chain, mining, distribution, or selling, these big names in the industry have an important say in managing all of these. They also play an important role in maintaining the balance between demand and supply and deciding prices for the stones. Sometimes by limiting supply and increasing demand they tried to enhance the price of diamonds, making this stone even more precious and establishing it as an icon of elegance and luxury.

Big names like the De Beers, Alrosa, and others own mining rights in some of the most productive diamond sites in the world like South Africa, Botswana, Russia, Canada, etc. Getting hold of these mining sites offers them an extra edge over diamond production and the power to influence the market as per their need. They can dominate the global diamond market, affecting total supply and demand.

To control prices and eliminate the possibility of market saturation certain big names like De Beers work on supply control strategies and work-out plans.

• Stockpiling Diamonds: Diamond companies carefully monitor the market and make sure that there is no oversupplying of diamonds. By providing a limited amount of diamonds in the market these companies try to maintain high prices for the stone and manage supply and demand. The limited presence of stone in the market makes them a highly valuable product and customers pay high prices for them.
• Market Price Stabilization: Market price stabilization is another important tool in the hands of diamond companies to manage diamond prices in the market. When there is less demand for diamonds, companies put down the mining process and limit the supply to restrict price drops in the market. This ensures that the diamond remains the symbol of luxury and class.
• Campaigns for Diamonds: Big names in the diamond industry take the help of marketing campaigns to promote sales of diamonds. By investing heavily in promotion campaigns they attract consumers towards diamonds and create demand in the market.

Value Added Through Distribution

Diamond has to go through various stages before it reaches the market for sale. There is a multi-layered operational network for the distribution of diamonds around the world. The network consists of wholesalers, retailers, and different jewelry brands.

The wholesaler is the first who takes diamonds directly either from the mines or cutting centers and adds up his cost in the diamond price before supplying it ahead in the market. Then comes the retailer who buys diamonds from the wholesalers and passes it onto jewelry stores or customers after adding its brand, marketing, and operational expenses to the final cost. The price paid by the customers for a diamond is the result of multiple mark-ups added in the journey of a diamond from mine to market.

Brand image, expensive marketing campaigns, the cost of classy stores, and opulent packaging all add up to the price of a diamond sale by retailers. The mark-ups in the supply chain of a diamond represent both operational and branding expenses.

Marketing and Demand Creation

“A Diamond Is Forever”: The Impact of Advertising

Ever think about what makes a diamond the pure symbol of luxury and love? One of the main reasons is its unmatchable brilliance. But it is not the only reason. An advertisement launched by De Beers in the 1940s makes the diamond the symbol of everlasting love and commitment in the modern centuries. The advertisement with the slogan “a diamond is forever” touches the hearts of the masses and makes them feel that diamonds are the true voice of romantic tradition. The line successfully demonstrates the power of diamonds in the history of human civilization. From ancient empires to modern societies people admire diamonds for their timeless beauty and elegance.

In modern times engagement rings have become the symbol of unbreakable love, and people trust diamonds as the center stone for engagement rings. Diamonds represent strength, purity, and brilliance, the pillars that also define modern relationships, and this is why diamonds are the first choice for representing love. Also, the emotional aspect and rare presence make diamonds a perfect fit for engagement rings, and all these factors together shaped the public perception of diamonds and gave rise to the demand for diamond rings over the years.

Social Pressure and Cultural Significance

The main reason why diamonds become so popular is their acceptance as the torchbearers for love, commitment, and status. Advertisements and social expectations have increased this perception and made the diamond the true symbol of love and purity. The institution of weddings and engagements stands on the pillars of commitment and purity. This is what the diamond represents and perfectly matches the idea of responsibility. Also, advertisements played a crucial role in defining diamonds as a symbol of “pure love”. They made the diamond a product of cultural significance and strengthened the perception among commonality that diamonds since centuries are the representatives of romance and purity.

When an emotional element is added to the marketing techniques, it becomes an unbeatable combination. Advertisements are specially designed to arouse emotions and make people feel love for the diamond. It creates a sense of responsibility among buyers to add diamonds to their lives as a symbol of love and purity. Even diamonds are expensive but they have become part of our prestige and love.

Conclusion

Geological difficulties, rare presence, complicated production processes, and cultural importance all these factors make diamonds not only desirable but also valuable assets. Diamonds are the products of extreme natural conditions and skillful craftsmanship that offer them unparalleled brilliance and an alluring appearance. It is true that diamonds are exceptional products of nature and human skill. Effective marketing strategies, conventional desires, and complex supply chains further enhance their overall value in the market. Establishing them as the epitome of luxury and purity.

Natural diamonds are always the symbol of royalty. Whether it is modern societies or ancient empires, natural diamonds are the subject of utmost importance. However, with the rise in advanced technology and the advent of lab-grown diamonds, the popularity of natural diamonds may be affected but they are still cherished as the true symbol of purity. Also with the introduction of sustainable mining practices, the diamond industry is facing new changes. These changes are affecting the price dynamics of the market. It is true that with changing times things change, but one thing that remains the same is “diamonds are forever”.

FAQs

1. Are Diamonds Really as Rare as We Think?

Natural diamonds are rare in the market. They are obtained after exhaustive mining processes. However, with specialized supply strategy and marketing approaches, their demand and supply are balanced in the market.

2. Why are Lab-grown Diamonds Cheaper than Natural Diamonds?

Lab-grown diamonds are produced in the laboratories using advanced technology and creating High temperatures and pressure. Their production is quicker than natural diamonds that are obtained after complex mining processes. Also, lab-grown diamonds are more readily available in the market than natural diamonds. All these affect the price of lab-grown and natural diamonds.

3. Does Diamond Certification Impact the Price Significantly?

Yes, diamond certification impacts the price of a diamond significantly. A certified diamond is more expensive than a non-certified diamond because it comes with assurance of quality and value. Certified diamonds are thoroughly checked by grading agencies like GIA, AGS, etc. This offers peace of mind to the buyers and makes them feel safe for their purchase.

4. Are Diamonds a Good Investment?

In certain situations, diamonds are not good for investment. The reason is their resale value is comparatively lower than their purchase value. The price of a diamond is not always fixed in the market and varies.

5. What Makes Certain Diamonds More Expensive than Others?

Factors like the 4 C’s (cut, color, clarity, and carat weight), rarity, origin (natural or lab-grown), and certification make diamonds more expensive than others. Natural diamonds with certification are more expensive than other diamonds.