This Article Explores
When you think of diamonds, what immediately comes to mind?
Is it engagement rings and fairytales, or investable assets and mining?
Diamonds have been around since the fourth century BC. Every natural diamond is immensely old, formed long before dinosaurs roamed the earth. The youngest diamond is 900 million years old, and the oldest is 3.2 billion years old. As the stones made their way through different centuries, time periods, and cultures, unique myths, legends, and even superstitions were created and passed down.
In our mission to bring investable diamond commodities to the broader market, Diamond Standard has encountered some common myths that have proven persistent – and which, without a more informed perspective, sometimes hold investors back from realizing the full benefits of these popular stones as investable assets.
Here are some of the biggest myths – and the truth behind the misconceptions.
MYTH: De Beers Controls the Diamond Market
TRUTH: De Beers Is a Leader Among Many Others
De Beers Consolidated Mines Limited was the first company to mine and sell diamonds at significant scale. The company created the original large-scale diamond mine in South Africa, monopolized distribution of the stone, then went on to build a highly successful marketing campaign making diamonds the global stone of choice in engagement rings. As we know, engagement rings are now synonymous with diamonds, with millions of consumers convinced that such rings should incorporate the stones.
While De Beers introduced diamonds to the global market and polished the stone’s image to gain engagement and exclusivity, De Beers’ monopoly on diamonds has largely eroded today. In 2000, De Beers agreed to stop stockpiling diamonds, but four years later, it pled guilty to criminal price fixing in order to return to the U.S. market. De Beers currently controls between 35% to 40% globally of the diamond rough supply, down drastically from the 90% it controlled in the 1900s. Today, it’s market supply and demand that drive the price and availability of diamonds — not a De Beers monopoly.
According to Rapaport, 124 companies are buying from De Beers, Alrosa, Rio Tinto and Dominion. “Between them, they’re supplying 124 diamond companies, many of which are buying from multiple sources. Among those companies, 41 are headquartered in India, 38 in Belgium, followed by Israel with 15, seven in each of Russia and the U.S., and six based in Hong Kong.”
MYTH: ‘Blood Diamonds’ Remain Prevalent in the Diamond Market
TRUTH: Thanks to the Kimberley Process, 99.8% of diamonds are now certified conflict-free
In 2003, the United Nations took action to put an end to the flow of conflict diamonds, or “blood diamonds,” by establishing a multilateral trade regime and certification scheme called the Kimberley Process (KP). The KP – implemented through the national legislations of its 82 participating countries – acts as a regulator for transparency in the diamond market to ensure that sales of rough diamonds are not funding violent acts or rebel movements. Today, thanks to the KP, 99.8% of the world’s diamonds originate from conflict-free sources.
Diamonds from regions that meet the minimum requirements of the KP, such as Qatar, Australia, Ghana, and more, are not “blood diamonds” funding wars and violence – rather, they are critical exports that support mining companies and their workers.
On a related note: Diamond Standard wholeheartedly supports the expansion of the KP to further restrict trade in Russian diamonds that may be used to circumvent sanctions that have been placed on that nation as a result of its invasion of Ukraine.
MYTH: Diamond Prices are Artificially Inflated
TRUTH: Diamond Prices are Now Set by Market Forces of Supply and Demand
Since the end of the De Beers monopoly, the global diamond market has achieved increasing pricing transparency, although the company does maintain some ongoing influence in this area. Today, diamond prices are determined by the four Cs: carat, cut, clarity and color, which are determined by the Gemological Institute of America (GIA) or the International Gemological Institute (IGI).
Consider the depth and breadth of diamond dealers fulfilling key functions across the value chain. The World Federation of Diamond Bourses (WFDB) is a global association of 29 major diamond bourses with nearly 30,000 members. Diving deeper into the largest bourse, the Bharat Diamond Bourse (BDB) in Mumbai, India is home to 2,500 small and large diamond traders.
Not only is diamond competition fierce across the globe, it’s also seen at national levels. The BDB is about to see competition as the Surat Diamond Bourse (SDB) seeks to become the epicenter for India's diamond trade. The SDB is constructing the world’s largest office building with the potential to host 4,000 dealers.
MYTH: Diamonds Today are Overwhelmingly Sourced from Africa and Russia
TRUTH: Diamonds are Present in Over 35 countries
While, yes, many diamonds are mined in both Africa and Russia, these aren’t the only places to source them. Canada and Australia, for example, are areas with significant diamond production. In 2017, Canada mines produced a total of 23 million carats of diamonds, while Australia sourced 17.4 million carats between 2019 and 2020.
Regions in the Americas are also producing diamonds. Brazil has recently emerged as a smaller source, producing 31,825 carats in 2015, according to Kimberley Process findings.
The Crater of Diamonds State Park in Arkansas is also included as a diamond-bearing site, and the first to be accessible to the public. Park visitors can access the 37-acre field for gems—including diamonds—and anything they find is theirs to keep.
MYTH: Color and Clarity are the Only Factors that Matter When Buying Diamonds
TRUTH: The 4Cs– Carat, Cut, Clarity, and Color–Determine the Quality and Price of a Diamond
Society typically equates high color and clarity grades with beauty in diamonds, leading to a misperception that these are the two primary drivers of a stone’s worth. However, the reality is that the other two C’s – cut and carats – can also sway the value of these stones.
Cut can significantly impact the value of a diamond. A certain cut with unique facets can determine just how much the diamond sparkles or reflects light, and in turn, influence its price. To determine quality, these diamonds are evaluated on symmetry, polish, brilliance, and fire, and placed in several categories: poor, fair, good, very good, and excellent. Those that are poorly cut run the risk of appearing dull, which can decrease value substantially.
Carat weight is also integral to the overall value of the diamond, as it measures and determines the diamond’s price and reveals its rarity. It’s important to note that weight is not synonymous with diamond sizes, as gem materials can have distinct densities from one another.
By being aware of the misconceptions above, diamond buyers can make the best, most informed decisions when selecting and purchasing diamonds. Even more importantly, investors in the burgeoning diamond commodities market can make allocations to their portfolios secure in the knowledge that the market for these stones is increasingly transparent and open.
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