Posted on September 2, 2015 by

The Great Diamond Value Hoax

118 ct white diamond oval on auction at Sotheby's Hong Kong

If you’re one of the countless number of people who equate engagements and marriage with diamond rings, then De Beers has clearly succeeded once again. The longstanding mining empire singlehandedly controlled the global diamond supply and dominated the diamond industry for nearly a century. For the last few generations, lovebirds on the verge of getting engaged have believed that a proposal is not complete without a diamond engagement ring. We have only one company – De Beers – to thank for the enduring diamond engagement ring tradition that its detractors consistently argue is actually The Great Diamond Value Hoax. While this debate may certainly be relevant for colorless diamonds, fancy colored diamonds are arguably exempt from the argument because of their absolute rarity and infrequent occurrence.

 

De Beers' advertising slogan "A Diamond Is Forever" featuring a trio of diamond engagement rings

De Beers’ “A Diamond Is Forever” advertising slogan is perhaps the most well-known of the 20th Century.

 

The Idea of ‘Diamond Value’ Originated from De Beers

The Rise of De Beers

 

Established in 1888, De Beers became a diamond cartel when it took the company just a few short years to snap up one diamond mine after another throughout South Africa. In other places around the world the mining giant assumed different names, operating as “The Diamond Trading Company” in London and “The Syndicate” in Israel. De Beers was able to monopolize the diamond industry by granting exclusive contracts to suppliers and buyers, resulting in virtually all diamonds having to travel through the De Beers channel. The foundation of De Beers’ business structure in the 20th century was the “sightholder” arrangement where its London clearing house would sort rough diamonds and prepare them for selling to clients by invitation only, better known within the industry as sightholders. These exclusive sales, which took place ten times a year, provided pre-selected rough diamonds whose prices were not open for negotiation. The sightholders had to cut and polish the stones themselves – a process which De Beers abstained from – to prepare them for selling to retailers.

 

With a sharp eye on international diamond supply and demand trends, De Beers knew the only surefire way to keep its plum position at the top was by controlling the overwhelming majority of the world’s rough diamond supply. In order to keep a tight rein on diamond availability and thus diamond prices, the company would stockpile diamonds and strategically release its supply to the market to compete with other diamond producers who refused to join the De Beers cartel.

 

The Advertising Slogan of the Century

 

In 1947, advertising copywriter Frances Gerety invented the best advertising slogan of the 20th century, “A diamond is forever,” according to Advertising Age. The underlying message behind “A diamond is forever” suggests that the sparkling token of love and marriage is rooted in permanence and is never to be resold because that would merely flood the market with a supply of unwanted diamonds, thus driving down demand (and prices). De Beers’ clever catchphrase sustains the Great Diamond Value Hoax and ultimately belies the intrinsic value of a diamond.

 

In the late 1930s, just as De Beers was trying to break into the American consumer market, overwhelming American sentiment indicated that diamonds were generally an unnecessary part of daily life and were a luxury for the fabulously wealthy sector. More than selling the actual product itself, the advertising agency for which Gerety worked and which De Beers partnered with to create their advertisements, N.W. Ayer, discovered the ultimate secret of highly successful and effective advertising – sell the emotional connection that binds the product to the consumer. In De Beers’ case, the diamond engagement ring served as the only genuine symbol of a man’s love for a woman. No marriage was complete without a diamond engagement ring going forward. The birth of the simple yet unforgettable slogan for De Beers effectively created the enduring diamond engagement ring tradition for couples looking to get married, a phenomenon that continues to dominate today.

 

The Industry’s Black Eye

 

De Beers was notorious for keeping its diamond sourcing system under tight wraps. The company refused to ever disclose where all of its diamonds came from. This total absence of transparency proved to be extremely problematic when it was made known that rebel fighters in Africa were paying for their armed wars by selling what would eventually be known as conflict diamonds.

 

The emergence of conflict diamonds prompted the creation of the Kimberley Process, an internationally recognized diamond certification system whose aim is to put an end to trading in conflict diamonds by having its members prove the origins of their exported diamonds so that proper tracking can be done.

 

In recent years, however, the so-called Kimberley Process has experienced its own fall from grace within the industry due to its limited scope.

 

De Beers’ Fall from The Top

 

At the turn of the 21st century, De Beers finally lost its iron grip on the industry when diamond-rich countries like Russia, Australia and Canada began selling the output from their diamond mines directly to the market rather than allowing themselves to be absorbed into the single channel system established by De Beers. Competition from these countries and market forces at large are responsible for De Beers’ loss of dominance.

 

How Does the Great Diamond Value Hoax Apply to Fancy Colored Diamonds?

 

From a purely statistical standpoint, fancy colored diamonds are much rarer than colorless diamonds. For every 10,000 carats of diamonds that are mined, just 1 carat will be a fancy colored diamond. On average, an estimated 110 million carats are mined every year, and of that amount, only 2,000 carats will be colored diamonds. To emphasize the undeniable rarity of colored diamonds, pink diamonds, for instance, are some of the rarest colored diamonds around. At the Argyle diamond mine in Western Australia, less than one-tenth of 1% of the overall yield are pink diamonds, and of that limited yield, only a few will be investment grade pink diamonds.

 

Colored diamonds prove to be an ideal investment because the mines that supply these diamonds are ever dwindling. The Argyle mine has been widely reported to shut down in another small handful of years. With the general life expectancy of colored diamond mines severely shortened, the demand for colored diamonds has only grown, and continues to grow. As a result, prices of fancy colored diamonds are expected to rise dramatically in the coming years.


Looking for your own rare colored diamond or diamond engagement ring? Shop our extensive collection today!


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