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Rehs Company, Inc .Diamond Life Newsletter

News and Information concerning diamonds and the Industry

By: Alan Rehs

Diamonds Can Bounce

The economic downturn has proven to be challenging to most industries, and the diamond industry is no exception. With demand for diamonds at it s highest in earlier 2008, and mining operations at greatly increased productivity, the downturn hit the diamond community right in the face. The first six to seven months of the crisis were very hard on the wholesale industry. Diamond dealers delayed or stopped all orders from diamond cutting firms. Diamond cutters stopped purchases of rough diamonds from mining corporations. Diamond miners stopped digging and the wholesale community sat still and prices fell sharply. Without cash flow the goods are too expensive to mine, too expensive to cut and too expensive to hold. Some firms were forced to pay down loans and liquidate inventory. A few lucky firms with strong cash positions were able to exploit this opportunity and buy diamonds at greatly reduced prices.

Although most wholesalers stopped, the retail public did not. Young men and women were and still are getting engaged. Men are still telling women they love them, and women still love diamonds. The continued retail support and the lack of new diamonds in the pipeline have led to a nice bounce in the wholesale price of diamonds. Prices are stabilizing, diamond-cutting factories are back in operation, mines are coming back online and the diamond community is moving again. I am not suggesting that it is yet able to run, but it is back on its feet and walking.

Though the bubble has broken and prices were affected sharply, demand and market realities have helped diamonds bounce back.

Cut Grade…..

GIA (Gemological Institute of America) the industry’s leading diamond grading organization has introduced, after several years of research, a cut grade to classify how well a round brilliant diamond has been cut. A system to define an accurate cut grade has been very difficult. It is not only the brilliance, but scintillation, dispersion and the overall craftsmanship of the diamond which define how well a diamond has been produced. Many individuals and organizations have claimed to have produced the ideal cut diamond and have put into affect a grading system; however, most were based on wide held industry beliefs or an individual’s preferences. The GIA hopes years of computer modeling and hands on experience viewing diamonds have helped them to create a reliable system for judging all the basic optical and physical components found in a well cut diamond.

Light performance in a diamond is governed mainly by the angles that the diamond’s facets are cut in relation to its girdle. Pavilion facets (the main eight facets on the bottom of a round diamond) must be cut at an angle of approximately 41 degrees, with a variance of less then one degree in either direction. The eight main crown facets located on the top of the diamond usually range in angle from 30 – 36.5 degrees. All the additional facets (a traditional round brilliant has 57 facets or 58 facets, if a culet facet has been added to the very bottom of the diamond) also must be added within similar tolerances. The interaction of these facet angles and the relative size of its facets control the path light will travel, and the “life” we expect from a diamond. No one set of these variables will produce one ideal cut. There are many ways to produce a diamond that perform at an optimal level.

GIA has changed the layout of its diamond reports and added a cut grade of Excellent, Very Good, Good, Fair and Poor. Since its introduction on the first of the year, it has been to a great degree, accepted into the diamond community. I know the GIA hopes this new system will help the consumer make a better informed decision when purchasing a diamond.

There are some limitations to the cut grade. It does not take into account some ascetic concerns such as table size and depth percentages. In addition, most professional diamond dealers and retail store owners cannot see a great difference in the overall “life” of the diamond that falls into either of the first two cut categories. In future articles I will discuss at more length the importance of cut and each of the components that control the beauty it creates.

Conmen, the Trusting and the Greedy….

The diamond dealer has long been the victim of the con. To understand why, one must first understand how we conduct our business. Almost every deal is done on a simple handshake, a word “mazel” and a signature on an invoice or memorandum. Most diamond dealers work on small margins, huge volume and are mostly under capitalized. This forces most firms to sell quickly in order to maintain cash flow. When there is a slow down in sales and money is tight or merchandise difficult to purchase, certain questionable opportunities look interesting.

The most common con is when an individual or group of individuals enter the industry and conduct business in an ethical and proper way; buying product, paying their bills, building credit and confidence with each of their vendors. Then once they have the confidence of just a few reliable individuals or firms within the industry they can proceed to take diamonds on consignment or purchase for tens of millions dollars. The other cons play on the greed found in the hearts of most men. This is the con which you know is too good to be true, but the bait is too alluring to refuse. Usually someone wants to sell you an incredible quantity of diamonds at a very attractive price. They live in a distant location in Africa or South America, they need your help, and in exchange they can help you make a large and profitable business transaction. Other conmen offer you opportunities to sell your product to presidents or industry leaders from around world. Though in hindsight they seem like obvious scams, these conmen go to great length to deceive; from forged documents to large yachts and fancy clothes. The worst part is that some of these people have found ways to avoid prosecution and have even been able to reenter the diamond industry. In upcoming issues I will discuss some of these scams at length.

96.56cts Rough Diamond…………

We finished cutting the last of 5 diamonds from a single piece of rough diamond weighting 96.56cts. The Diamond yield: a 6.10cts. Heart shape diamond D IF, a 3.69cts. Pear shape D VVS2, a 2.03cts. D IF excellent cut Round Brilliant, a 1.56cts emerald cut D IF, and finally a 1.53 Round Brilliant cut D IF. In addition, GIA has returned our beautiful 8.06 H VS1 excellent cut Round Brilliant, and we are still cutting its sister diamond to match.

 

 

Copyright 2006

 

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