Are Diamonds Valuable?

Diamonds may be up to three billion years old; their crystallization occurs 320 miles below the surface of the earth. These crystals work their way to the surface via kimberlite and lamproite pipes. These pipes are cylindrical in shape and act as a conduit from the Earth's mantle to the continental crust. This gemstone has forever been known for it's, hardness, invincibility, and superior optical properties.

Rarity of the Stones

Most people believe diamonds are the rarest thing on the planet and that’s what makes them so valuable. Nothing could be further from the truth. There are enough diamonds in the world to fill a coffee cup for every man and woman on this planet. The actual reason they are so expensive is because strict controls are placed on the quantity of gemstones produced for sale worldwide. This marketing strategy is very similar to the world wide marketing of oil: they limit the supply to keep the prices high.

De Beers was founded in South Africa in 1888 and today is the largest producer and seller of diamonds.  Almost from the beginning the De Beers company has had a strangle hold on the diamond industry and a huge advertising budget.  Diamonds are not as rare as the advertiser would have you to believe.  De Beers keeps a huge stockpile of diamonds and tightly controls supply.

Cut 

The quality of a diamond is determined by four factors known as the "Four Cs." They are carat weight, clarity, color, and cut. The "cut" is the trickiest of the four. The differences between a "great cut," a "good cut," and a "bad" cut cannot be detected by the untrained eye so the buyer should be aware, because the quality of the cut will make a huge difference in its beauty and value. Cut determines 80 percent of a diamond's value.

Carat

A one carat diamond weighs exactly 200 milligrams. The carat weight is usually subdivided into "points." There are 100 points in a carat. Be careful not to confuse the weight of the stone with its size or the carats of a different stone. Because different minerals have different densities, a one carat diamond will have a different volume than a one carat ruby.

Clarity

Clarity is a measure of the number and extent of flaws in the gemstone. Completely flawless diamonds are rare. Only a few hundred flawless stones are produced every year, once again keeping the supply low to keep the price high.

Clarity is determined by the number of blemishes on the surfaces of the diamond and the number of inclusions such as air bubbles, cracks, and foreign material inside of the diamond.  When both terms are being referenced the term defects is usually referenced.  Nature rarely produces anything that is with out defects and this hold true for diamonds.  Most diamonds will have some type of defect or flaw.

Color 

The "color" of a diamond refers to its degree of "yellowness." The perfect stone is colorless and thus the most expensive.  The coloration of diamonds can be caused by several factors.  Impurities trapped in the diamond during its formation, the crystal lattice structure of the diamond, and the exposure to radiation can all lead to the wide verity of colors available in diamonds.

So to answer the question: Are diamonds valuable?  Today the answer would be yes and they have been valuable for thousands of years but the big diamond companies control the availably of the gemstones.  Let the investor beware.