Every diamond starts its life as an unpolished stone that is plucked from the Earth. Actually, they started forming millions of years ago, but that is another story. For all intents and purposes, the price of a diamond begins to take shape the minute it comes out of the ground. However, it seems that the company that mines the diamonds has little interest in taking it all the way from the ground to your finger. Instead, they sell rough stones to an intermediary called a sight-holder, which is a company that will cut and polish each stone. From there, the finished product will be purchased by diamond dealers, wholesalers, and brokers, as well as jewelry manufacturers and retailers. And as a stone is passed from person to person, the price gets bumped up.
But it starts with the first transaction. Sight-holders set the initial price of a rough diamond by using one of several formulas to determine the relative value of the raw stones they purchase from the mining outfit. It is usually at this point that the stone is cut and polished for the next leg of its journey. Once a diamond is in perfect condition to sell, an independent company is engaged for an appraisal that will certify the cut, color, clarity, and carat in order to determine fair market value. Then the stone is ready to be passed on. The selling price a sight-holder settles on takes into account the following factors: what was paid for the rough stone, the cost of processing and appraisal, possible expenses for shipping/carrying the stone to its final destination, and of course, the profit margin. This point of sale is called the primary market because it is the first place that the finished stone is available for sale.
But this is not the end of the road for a diamond that is now on the market and ready for public consumption. It is at this point that stones are first offered to the public and the actual diamond market is “made”. Often, gems are bought and sold several times by dealers before they ever get close to final sale, and each time a markup is applied so that the charge for a customer is significantly higher than the initial cost. However, that can be considered the real price for dealing in diamonds. The many transfers that occur along the way are what really determine the value of your diamond, which is why it pays to get as close to the source as you can if you want to cut costs.
