Acquiring & Valuing Rare Colored Diamonds
The majority of people will say that they were unaware that diamonds came in any form other than in clear diamonds. In fact, diamonds come in every color of the rainbow. Natural colored diamonds are extremely rare, extremely beautiful and extremely valuable.
One of the most important things about natural fancy colored blue, pink, orange and yellow diamonds (as well as ultra-rare reds, greens and purples) is that they have maintained their value since dealers started monitoring prices in the early 1970’s. Some may have moved laterally during a heavy economic recession in major industrialized countries but they have been impervious to down side pressure.
No other tangible or traditional investment has ever performed like that over a period of over 30 years!
On average, natural fancy blue diamonds have grown 100 % in price every 6 years from 1970 on, natural fancy pink diamonds have grown by 100 % in price every 7 years on average from 1970 on, and natural fancy yellow diamonds have grown by 100 % in price every 9 years from 1970 on. Matching pairs of natural fancy colored diamonds can command premiums of up to 30% over individual stones in the same color and quality. Mutual funds and bond traders only dream of this kind of performance.
Where Can I Buy Colored Diamonds?
Retailers normally have a limited inventory of colored diamonds. However, they can acquire stones in the secondary market. Although colored diamonds are very popular at the retail level, buyers will be paying established retail prices. Most retailers in major diamond centers around the world are carrying a larger inventory of colored diamonds because of the interest from their clients but their prices tend to be much higher than at the auction and dealer level.
If you are planning to acquire a piece at one of the major auctions, you are required to provide financial information. Although you may be able to bid on a number of different stones, auctions are a sellers’ market and the top pieces usually see a number of buyers competing for the same stone. However, astute buyers have been successful at acquiring pieces at auction but it is important to recognize you are competing against large dealers, retailers and ultra high net worth individuals.
The most cost-effective way of acquiring colored diamonds of the best quality is through a small group of international specialty dealers. They are often in possession of rare colored diamonds unavailable at the retail level and at a more reasonable price than one would find at auction. The advice you will receive from a specialty dealer will be more personal and will give you a better gauge of the overall trends in the market.
They often have in-house cutting and polishing facilities and work as close to the source as possible, thus alleviating several layers of the supply chain and their associated increased prices.
These organizations are often family-run and have many generations of experience in the colored diamond business. More importantly, specialty dealers are obliged to maintain both discretion and confidentiality for their clients.
Valuing Colored Diamonds
In the current market, values are intimately associated with the color descriptions (grades) assigned to a particular stone, such as “Important Fancy Vivid Yellow Orange Diamond” (Sotheby’s Geneva November 2004 Lot 336) or “Magnificent Fancy Intense Blue Diamond” (Christie’s NY April 2006 Lot 302). These color grades incorporate both scientific facts and market opinions, therefore the interpretation of value based upon the description of color is the most important component among diamond industry professionals, collectors and connoisseurs.
The Science of Color GradingIn an effort to introduce order to this chaos, leading diamond grading laboratories are continually improving their color grading methods to communicate color more accurately. The GIA has a master set of colored diamonds in each category and uses precise color charts in various forms of lighting to ascertain a precise color grade of the stone. This color analysis is accompanied by several tests to confirm the fact that the diamond is natural using millions of dollars of precise equipment. The GIA will then confirm the clarity, polish, symmetry and fluorescence.
Fancy colored diamonds are traded almost exclusively using diamond grading reports by the Gemological Institute of America (GIA). So much has been written about the importance of the development of scientific diamond grading (both for clear and colored diamonds), we will not belabor the point.
It is important to buy a fancy colored diamond with this accompanying document. The colored diamond grading report is the “pedigree” for the stone. It will tell you if the color is natural or enhanced by man. If it says that the origin of the color is “natural”, buy it even at premium prices. Color can be an extremely complex subject to understand. Most of us know about the four C’s: color, clarity, cut and carat weight. Color in colored diamonds far outweighs the absence of color in white diamonds as a valuation factor. In the rarest of colors, clarity, cut and carat weight effect value but to a significantly less degree than in clear diamonds. For example, a fancy intense pink or blue stone can actually have eye visible inclusions and be worth tens of thousands, even hundreds of thousands of dollars per carat. No white diamond with eye visible inclusions will ever approach those figures. Carat weight does have an important impact, but a sub-carat natural purple, green or red diamond will carry an enormous price tag simply because of its rarity. In general, colored diamonds that run from Fancy through Fancy Intense through Fancy Vivid will be the overall quality line which produces the most expensive of colored diamonds in any given color. These grades balance the purity of color with the most saturation.
Colored Diamond Pricing
In the rarified world of colored diamonds, one can attempt to generalize values by listing the upper limitations that have been achieved for exceptional specimens of various color varieties. This data is part of the public record gathered from sales held at Christie’s, Sotheby’s and Bonham’s, which have occurred at various auctions over the last fifteen years. If we take a closer look at this public record of color grades and prices per carat for each color, we can see noticeable pricing trends for dominant color grades, sizes and clarity levels. Interestingly, the actual shape of a stone tends to be less of a factor in the prices achieved at auction, as long as each respective stone is a well-made stone in its respective shape. We see heart, oval, cushion, pear, emerald and rounds, as well as marquis shapes, selling for healthy prices, which indicates that buyers recognize the rarity of these types of stones and are looking for attractive colors presented in well-made stones of various shapes. In addition to the color (grade) and size (carat weight), clarity (flawless to imperfect grades) also play a role in determining value. However, a relatively high percentage of the stones selling at auction are not even graded for clarity and still sell for comparable prices to higher clarity-graded stones, so clarity cannot be considered the primary determinant of value. Likewise at the dealer level, buyers are primarily looking for well-made, eye clean stones but the level of color saturation is always going to be the most important indication of pricing levels.
In general, the value of colored diamonds (whether destined for a private collection or commercial investment), is inevitably driven by the economies of the world. The economic cycles of the past fifteen years have seen colored diamonds reach new heights in value as price records were broken. Then values reached a plateau as world finances tightened. And then the cycle began again and even newer heights were reached. To those who regularly follow the auction sales of colored diamonds, this does not come as news. In fact, steady growth with brief periods of quiescence continues to be the norm for colored diamond valuation, all because of scarcity.
Colored Diamond Sales at Auction
Over the last decade, colored diamond sales at auction have been an important barometer for pricing levels in the major categories of the market: pink, blue, yellow, green, orange and purple, as well as red.
There are dozens of auctions a year globally selling hundreds of colored diamonds for as little as $10,000 to over $30 million dollars. The participants at auction are the dealers, retailers, private buyers and even the auction houses themselves, who periodically participate on the sell side of some of the stones being sold.
These sales at auction give a good gauge of pricing levels for the main categories of the market and help give guidelines of prices being achieved on a global basis.
Although the auction houses do charge a commission on sales, their ability to tap into their large client base of high net worth individuals and their strong relationship and expertise on the market help give important guidance in the market to buyers looking to keep track of prices.
Over the last decade, colored diamond exchanges and online platforms have brought the pricing levels of the rarest and finest colored diamonds to the general public. These diamonds previously traded hands in the offices and showrooms of the world’s most prominent cutters, dealers and jewelers. This used to be something the public never heard about. However, in today’s market, hundreds of dealers openly competing with each other around the globe have published pricing levels for major categories of actively traded stones to guide buyers in appropriate pricing levels for specific types of colored diamonds.
AIDC Advantage has an open policy on colored diamond pricing and will always send their clients comparable pricing levels from major diamond centers in New York, Tel Aviv, Antwerp and several of the other major diamond trading centers around the world so you can confirm dealer pricing levels.
However, it is also important to recognize that each colored diamond, like a fine work of art, has individual characteristics that make it unique and special in its own right, and thus colored diamonds tend to trade in tight pricing ranges depending on the value the owner of the stone places on his diamond offerings.
For example, a beautiful 0.33 Carat Fancy Intense Argyle Pink diamond may have an asking price from one dealer of $20,000. Other dealers may be asking between $19,000 and $23,000 for similar stones, but this particular 0.33 carat may have a slightly better cut or slightly stronger color than even the stone with a price of $23,000, which means acquiring the 0.33 carat stone for $20,000 actually offers much better value than comparable stones in the market.
We see the same thing in the real estate market. An apartment may have a price of $220,000, whereas similar apartments have asking prices of $200,000 to $240,000. However, the apartment for $220,000 may have a better kitchen and a better view than the other two apartments, in which case the one for $220,000 actually offers better value.
We keep a full database, regularly updated, of thousands of price offerings from dealers around the world to make sure we find the best value and rarity in the marketplace, which is why price discovery in our market is so important, to ensure our clients are receiving the highest value at the best price in this increasingly competitive market.
The Future Of The Colored Diamond Market
The colored diamond market has become one of the most important investment collectible markets over the last decade. With a long-term track record of price stability, growth and important elements of privacy and portability, colored diamonds are expected to become one of the most important growth markets for collectors in the world.
With the advent of a wide global distribution network for buying and selling colored diamonds at the auction, retail and dealer level combined with increased transparency and pricing mechanisms to help buyers understand the relative values of stones trading in the open market, colored diamonds are poised to continue their ascent to the pinnacle of the international market for rare collectibles.