Carat magic numbers - why .7 and .9?

[WinkHPD]

There’s another dynamic that has happened as well. Mass market jewelers in the US have long marketed things as ‘approximately ¾ carat’ and the like. This is legalese to accommodate the fact that if you make 1000 superficially identical rings, there will actually be differences if you really look at the details. That's fair and reasonable. It’s a matter of negotiation what is a reasonable margin and exactly what standards for ‘approximately’ are acceptable. This is why the threshold appeared at 0.70 rather than, say, 0.72 or 0.75. ‘Approximately 3/4 cts’ does not mean the same thing as ‘at least 0.75cts’ but consumers tend to see them as the same.

Yes, Denver Appraiser is correct. If you read the small print on a department store ring or a Costco ring with a "1ct" diamond in it it will say something along the lines of actual weight will vary between 0.90cts and 1.10cts. Given the pricing on the rings, care to make any wagers on how many are over 0.99cts?

Just one more reason for caveat emptor!

Wink

 

[John P]

Mr Pollard, regarding the price jumps then, do you think that the carat weight categories exist as they do due to something other than market indicators based on the 500,000 daily data points? What might that other something or somethings be?

Thank you for the additional insight.

You're welcome. Good thread, which I hope is interesting to many.

To your question: The chicken-egg answer would reverse the nouns and ask-back: "...do you think that the market indicators based on the 500,000 daily data points exist as they do due to something other than the carat weight categories? What might that other something or somethings be?"

But I hope to provide more than that:

In defense of the list-makers I agree with Martin Rapaport and your IDEX contact; their guides are reflections of what the market will bear. For example, Let's imagine Rap and IDEX decided to go crazy and erase the 0.90-0.99 category. It's safe to say the world would not follow. End-consumers demonstrate willingness to pay a higher rate for 0.90 over "same" 0.89, but they won't pay a 1.00 carat premium for 0.99. The number lies somewhere-between and the pricing guides are meant to indicate roughly how much.

So the list-makers have a delicate responsibility: When trusted to report fairly they drive the bus, but if they deviate from reality too much their clients will get off that bus. In fact (when challenged) Martin has urged the trade not to use his guidelines if they think them unrealistic: "When your supplier sees the back of your head as the answer to his pricing he’ll ask you to wait and work with you...if not, it means he is able to get those prices, in which case the guide was correct to begin with." (sic)

What might that other something or somethings be?

Here are a few:

1. Global Influences. If demand for VS+ goes up notably in the Asia-Pacific the guides will reflect higher asking prices to some degree, even if USA sellers can't command them. A major example of this happened some years ago with large diamonds: 5.00 carat+ diamonds jumped 130% in price between 2007-2008 due to the Chinese-Indian economical boom. You may remember that this also influenced oil (+140%) and platinum (+92%). The 5ct+ category has adjusted itself in the past five years, but remains significantly higher than pre-2007. Why? Because the world has thousands of new millionaires now, with more emerging over the Pacific each year, which increases the target market, demand and sustainability of pricing in that category.

2. Economies: The Chinese/Indian boom caused polished prices to continue rising. This was dramatic in 2011, as I'm sure many here will recall. In contrast, 2012 saw relatively few changes. That can be attributed to two things; the crash of the Rupee in Q3-Q4 of 2011, which softened Indian demand, and consumers in the US (still the world's largest diamond market, at present) resisting further increases. The net effect in 2012 was little movement in the pricing guides.

3. Consumer Education: In 2012 a diamond with EGL paper was trading at 30-40% less (on average) than the same diamond with GIA or AGSL paper. Most consumers still don't realize the dramatic potential for differences in strictness or consistency here, but awareness has improved over time...especially with the internet as a resource. There is more distinct separation in deviation-from-zero between such categories now than there was five years ago. Why? Because as consumers become more educated they shop smarter. Today's B2B pricing data reflects that.

4. Supply: The world's largest diamond mines are being depleted. New mines are in-development, but they will fall short of demand projections if the east continues growing as-predicted. No discoveries of significance have occurred recently and it takes 5-10 years to bring a mine online, so it will be interesting to see how this develops as we approach 2020.

5. Man-Made Diamonds: Some diamantaires have wailed about this as "the end of the world" for decades. I've never seen it that way. The vast majority of consumers I know want to possess a natural diamond, and find MMDs far less appealing. So on its face this topic is far back in my rear-view mirror... The reason I bring it up here is the increasing number of incidents where nefarious entities are attempting to pass-off parcels of MMDs at the lab level; even introducing clarity characteristics into the growth process to subvert detection. Thankfully the world's major labs (with specific credit to IGI Antwerp, IGI HK and AG&J for recent rapid-response and trade-alerts) have made detection a strong focus. Consumers who buy diamonds with IGI, GIA, AGSL or HRD paper, specifically, are protected. But there are many diamonds for sale with no paper, or from labs that may not be capable or as-vigilant. The cops always seem to be a step behind the robbers and, while unlikely, if enough of these flooded the market it might influence pricing data.

[ *NOTE: With respect to PS policies any further discussion of the last paragraph should probably occur in the PS MMD forum - If the admin feels this paragraph is improper in RT please remove it. Thanks. ]

Possibly more, but it's time to head to a Superbowl party now. Hoping for a great game, fun commercials and (please) a proper, respectful National Anthem... I must be getting old.

Cheers,

 

[Karl_K]

Here is a trivia question:
How heavy is a 5 grainer diamond?
How about a 50 pointer?

I like it when Karl plays games. Here are two more:

What's minus-11?
What's 8/8?

No trade allowed to answer, Karl?

Good ones :}
It would be no fun if the trade members answered :}

 

[NWD]

One additional bit of info I gleaned from the IDEX site. I found designations for each carat weight category at IDEX. So, for example, diamonds from .18-.22 carats fit into the "1/5" carat category.

1/5 = .18-.22
1/4 = .23-.29
1/3 = .30-.39
3/8 = .4-.44
-1/2 = .45-.49
1/2+ = .5-.69
3/4 = .7-.79
.8 = .8-.89
.9 = .9-.99
4/4 = 1-1.24
1.25 = 1.25-1.49
1.5 = 1.5-1.99
2 = 2-2.99

It looks like at some carat weights (including .25 and .75), they chose to go above and below the actual carat weight but at .5, 1, 1.25, 1.5, 2, and others, they choose to start it right at the carat weight. Why, I don't know. I'll have to live with "market forces" until someone can get a more definitive answer on this straight from the source. Also, RAP's large category at .7-.89 seems especially large to be an "around .75" category so that's a mystery as well. Anyway, thanks to all who contributed here.

I'm totally lost on the old school jargon. I'd like to know, though, so I'll hazard guesses:

5 grainer = 5 carats?
50 pointer = .5 carats?
minus-11 = geez, .89 carats?
8/8 = 2 carat?

 

[John P]

It looks like at some carat weights (including .25 and .75), they chose to go above and below the actual carat weight but at .5, 1, 1.25, 1.5, 2, and others, they choose to start it right at the carat weight. Why, I don't know. I'll have to live with "market forces" until someone can get a more definitive answer on this straight from the source. Also, RAP's large category at .7-.89 seems especially large to be an "around .75" category so that's a mystery as well. Anyway, thanks to all who contributed here.

Much like the ancient parable about the blind men and the elephant, it takes many perspectives pieced together to understand the mechanism as a whole. http://en.wikipedia.org/wiki/Blind_men_and_an_elephant

Market forces at the consumer end have "created" categories like 0.90-0.99ct, along with annotations citing slightly higher prices for "Ideal" diamonds or higher-category ends like 1.25-1.49 over 1.00-1.24.

But economic forces upstream influence some of the demarcations. Parcels of diamond rough are traded in starting-crystal weights, not finished/polished weights. Cutting houses buy bulk parcels and those parcels - possibly mixed in terms of color/clarity - are grouped according to crystal size to make bidding simpler.

Here is a parcel offered for sale at tender. It is 144.81 carats total, with a wide range of color/clarity, but consisting of crystals weighing from 8GR-4CT (2.00-4.00 carats). This quality and weight of rough can generally be expected to yield primary stones between 1.00-2.00 carats...possibly more depending on shape/make parameters...with a much smaller secondary stone or "toppie."



The convenience for bidders is that they need only reference a couple of PPC categories for finished size/expected yield (which is helpful, since color, clarity and other specifics vary). So if someone estimates crystal A to yield 1.27 and it only finishes at 1.23 it's not a disaster... Although woe to the buyer who predicts a strong 1.00 and finishes at 0.98 (insert snarky comment about sending it to a soft lab to make up for the carat loss in color/clarity improvement...).

Logically, the potential range-of-yield shrinks as the parcel weights get smaller. A parcel of 5-6GR rough crystals (1.25-1.50 carats) should generally yield primary stones in the 0.70-0.89 area. A parcel of 4GR (1.00 carat) rough should generally yield stones of around 0.50-0.69 carats...sound familiar? This may help explain why having a category starting at 0.75 would be less useful in upstream buying situations than knowing you have a nominal range between 0.70-0.89.

That's how the front end of the "elephant" feels different than the rear. I should qualify this as a (very) simplified explanation, but I hope it illustrates why I correlate it to the parable.

As an aside, smaller stones (melee in particular) are often traded B2B using much different practices than the guides referred-to here.

I'm totally lost on the old school jargon. I'd like to know, though, so I'll hazard guesses:

5 grainer = 5 carats?
50 pointer = .5 carats?
minus-11 = geez, .89 carats?
8/8 = 2 carat?

I'll let Karl answer the ones he posed, though there are some context clues in my post above

* Minus-11: Refers to diamonds < 0.08 cts because they fall through the #11 plate in a standard set of diamond-sorting sieves.
* 8/8: Trade nomenclature for single-cuts, meaning diamonds with only 8 crown and pavilion facets (17 facets in all).

 

[Karl_K]

I'm totally lost on the old school jargon. I'd like to know, though, so I'll hazard guesses:

5 grainer = 5 carats? 1 grain is .25ct so 1.25ct
50 pointer = .5 carats? Bravo!

 

[Karl_K]

* Minus-11: Refers to diamonds < 0.08 cts because they fall through the #11 plate in a standard set of diamond-sorting sieves.

That's a new one on me, my guess was rap minus 11

 

[flamingoezz]

Is this why there are ZERO excellent or ideal cut diamonds in stock at WF between .82 and .89 carat regardless of clarity and color?

I'm guessing they'll cut a diamond with less than ideal dimensions just to hit that .9 mark..

 

[John P]

Is this why there are ZERO excellent or ideal cut diamonds in stock at WF between .82 and .89 carat regardless of clarity and color?

I'm guessing they'll cut a diamond with less than ideal dimensions just to hit that .9 mark..

Just so. It's most pronounced at demarcations like that one, and especially at 0.99-1.00.

 

[NWD]

Hey! 1 out of 4. I'll take it!

Thanks for the additional info Mr. Pollard. Rough sizes was one of my early guesses about what might determine (some) size category choices. I learned a lot from you and the other experts and PS members.