Why are diamonds so expensive?

The question that suddenly arises in the mind of an inquisitive person is, how can a simple pebble become the most valuable object in the world through polishing? Yes, diamonds are the most expensive item in the world. People are worshipers of beauty. 

From time immemorial, mankind has introduced the custom of wearing ornaments for beauty. Although oysters, snails, or bone fragments have been found as early evidence of ornamentation, the place has been occupied by a variety of bright stones and gemstones in the modern era.

Today, diamonds are one of the most valuable, solid and solid objects in the world. Diamond World Famous Brand Tiffany & Co. 

To buy an engagement ring retail store with a carat or a little more colorless Crystal Clear Excellent Cut, you have to shell out 7,500-8,500. Mathematically, a unit of carat mass is equal to 200 milligrams (0.2 grams; 0.006055 ounces). Tiffany & Co. 

In addition, the well-known brands in the diamond market include Harry Winston, Cartier, Chopard, Van Cleef & Arpels, etc.   

Tiffany & Co; Image Source: WWD

To discuss how and why diamonds became so expensive and popular as ornaments, we need to shed some light on some of the past history. Diamond is basically a solid form of carbon that is formed due to excessive heat, pressure and prolonged exposure to a certain condition. 

Most natural diamonds are converted into diamonds from carbon atoms at a temperature of 1500 degrees Celsius and a pressure of 45-90 kB , at depths of 100 miles and above the earth’s surface . Time is also a big regulator in the process of diamond conversion.   

It takes about 1 billion to 3.5 billion years for natural carbon to be converted into diamonds . Almost all the diamonds found to date are older than the earliest plants on Earth. Scientists believe that the carbon trapped inside the earth at the time of its formation gradually turned into diamonds under high heat and pressure.  

According to historians, the  Dravidians first discovered diamonds in India sometime between 2500 BC and 1600 BC (in the Bronze Age of the Indus Valley Civilization). 

Many believe that diamonds were first discovered in India around 1000 BC. According to Brilliance , the earliest written history of diamonds is found in the Sanskrit texts ‘Arthashastra’ and ‘Ratnapariksha’ written in ancient India around 400 BC.  

The carbon atom structure of diamond; Image Source: University of Illinois

The ancient text mentions the practice of exchanging diamonds as coins. Due to the use of diamonds as a means of trade and the connection of ancient trade routes (Silk Road) with India and China, this precious stone reached the Greek and Roman empires. 

Over the next few centuries, this precious gemstone became a symbol of nobility for the royal family, the influential families.

Sometime between the eleventh and thirteenth centuries, the world-famous 16-carat Kohinoor diamond was found in South India . 

Sometimes it was adorned in the Mughal court, sometimes it shone in the hands of Iranian warriors, sometimes it enriched the Afghan rulers or the Punjabi maharajas. Its current location is in the Tower of London, as part of the Crown Jewel. 

However, Kohinoor is not the only diamond in India. Evidence of at least two more diamonds resembling the Kohinoor is found in history. One is Darya-i-Noor , and the other is the Great Mughal Diamond .  

In 1839, Nadir Shah, the ruler of Iran, took these three diamonds along with other items of booty. Until the eighteenth century, people thought that diamonds could be found only in India. 

Towards the end of that century, when the stock of diamonds in India was depleted, the search for alternatives began in other countries.

Kuhinoor diamonds; Image Source: Robo Funny

Although a diamond mine was discovered in Brazil in 1825 , it could not meet the demand for diamonds in the world at that time. 

Some diamond mines were discovered in Russia and Australia in the next century. However, the world of diamonds changed dramatically after the discovery of several diamond mines along the Orange River in South Africa in the 18th century. 

After the discovery of two diamond mines, De Beers and Kimberley, in South Africa in 181, diamond production skyrocketed. As a result, the supply of diamonds in the market started increasing at a significant rate again. 

The price of diamonds continues to fall as supply continues to rise, which is a cause for concern for other diamond mine owners.  

Many owners close or sell their mines because of the gradual loss of resources. Cecil Rhodes, a brilliant British businessman, used the opportunity. He used to buy small mining operations. 

He also bought the De Beers mine from two brothers, Johannes Nicolas de Beers and Diedrich Arnoldos de Beers. De Beers mining company Kimberley Mining makes diamonds a little more accessible. After the discovery of this mine, the price of diamonds came down considerably. 

But they resorted to a tactic to keep prices and appeals from falling further. That is, no matter how many diamonds are mined, the supply of diamonds in the market will remain with the companies. 

At that time the main market for diamonds was the United States. The supply in the market was controlled according to the number of people using the diamond ring in their engagement every year. As a result, De Beers has managed to whip up the price of diamonds at will.

Cecil Rhodes; Image Source: Alamy

De Beers Consolidated Mines was founded in 18 under the leadership of Cecil Rhodes. They later took over most of the mines in South Africa. The page of the calendar has not yet reached the house of 1900. 

Meanwhile, the company controls 90 percent of the world’s diamond market through diamonds produced from South African mines. De Beers As a result of this betting, the diamond industry stood on its own two feet and the price of diamonds continued to rise.

Another person’s name is closely associated with the rise in the price of diamonds. He was Ernest Oppenheimer of German descent, born in 180. 

After joining the Diamond Syndicate in London in 1896 at the age of 18, he continued to show his skills and efficiency. Satisfied with his work, the company sent him to Kimberley, South Africa, as a customer of the company. By virtue of his merits, he was gradually appointed mayor of Kimberley Mines. 

In 1918, he formed a mining company with the help of JP Morgan, a famous American capitalist. It was named ‘Anglo American Corporation’.

From the very beginning, the company has been competing with the mining operations of De Beers Group. In 1924, Oppenheimer was elected to the South African General Assembly from the Kimberley constituency and became a member of the South African House of Assembly. 

In 1926, he forced Cecil Rhodes to abolish the mining system. Since then, the world’s diamond supply chain and marketing strategy has changed dramatically. As a result, the price of diamonds increases several times in one leap.

A comparative picture of the rise in the price of diamonds; Image Source: Ajediam

The quality of any diamond in the world is determined by 4C. This 4C means Color, Clarity, Cut and Carat Weight. Each of the diamonds found in nature varies in size, volume, color and clarity. So it is not possible to put diamonds within a certain price range. (Why are diamonds so expensive?)  

Many may think that the bigger the diamond in size and volume, the higher the price. But this idea is wrong. Diamonds are divided into 11 grades based on GIA clarity grading system . 

Of these, IF or F grade diamonds are considered to be the finest. These diamonds do not contain any impurities, they are pure crystals of pure carbon atoms. (Why are diamonds so expensive?)     

Color plays an important role in determining the price of a diamond. Color grading of diamonds starts from D and ends in Z. 

In the case of white diamonds, as the English alphabet progresses from D to the front of the diamond, the presence of yellow increases, and the price of the diamond decreases. 

However, in addition to white diamonds, there are several types of naturally occurring diamonds that are naturally colored, graded differently, and priced differently.

Diamond color and clarity grading; Image Source: Gemological Institute of America

Then the biggest impact on the price of diamonds is cutting and polishing. According to the Gemological Institute of America’s standard, diamond cuttings are graded into five sections in total. (Why are diamonds so expensive?)  

Of these, ‘Excellent Cut’ is the best. Different shapes of diamonds can also be noticed, among which round, princess, oval, cushion, pear, emerald, heart, marquise, rose, etc. are notable. The price of diamonds also varies based on that.

Diamonds of various sizes; Image Source: Gemological Institute of America

Although the production of diamonds is high at present, it can be said that diamonds used in jewelery are quite rare. About eighty percent of the diamonds produced from mines are not usable as gemstones. (Why are diamonds so expensive?) (Why are diamonds so expensive?)  

These are used for industrial diamonds. Although white diamonds are found in sufficient quantities, diamonds of different colors are very rare. As a result, ruby ​​(red), sapphire (blue) or emerald (green) diamonds are not so easily available. Their value is also skyrocketing, beyond the reach of the public.

Diamonds of different colors; Image Source: Pexel

In ancient times, diamond mining was practiced up to a small depth of soil due to lack of advanced machinery. With the advancement of technology, diamond mining is now done at depths of 500 to 600 meters below the ground. 

Diamond mining, on the one hand, is time consuming, on the other, difficult and expensive. As a result, production costs have risen in line with the amount of diamond extracted. 

This is also one of the reasons for the rise in diamond prices. Jewelry-decorated diamonds look as shiny, shiny, and shiny as extracted diamonds do not initially shine. This luminous form is given by polishing the diamonds obtained from the mine. (Why are diamonds so expensive?)

But there is a problem here too. Since each diamond is different in shape, polishing the diamond is not possible with any computerized automated machine. That’s why companies have to rely on skilled diamonds. 

In English they are called gem-cutters. The diamond cutters have to be very skilled and adept at dealing with the subtleties involved in cutting and polishing diamonds. Even if you can pay them, you have to lose a lot of money from the pocket of the company.

Interestingly, 90% of the world’s diamonds are cut and polished in India (in Surat, Gujarat ). About 650,000 people are employed in about 6,000 diamond manufacturing units in India. 

As diamond is one of the strongest materials in the world, the machinery and technology used for its cutting and polishing is quite expensive. During diamond cutting and polishing, a type of residue called ‘diamond dust’ is formed, which is basically a tiny particle of diamond. 

It is considered waste. Most of the diamonds have to be removed to make them look like jewelry. Which acts as an influencer in raising the price of diamonds.

Diamond cutting and polishing is done by skilled hands; Image Source: Andere Andre / Wikimedia

According to diamond expert Ira Wesman, diamonds are just like any other product. So it was never considered as an investment component. If you sell any diamond, you can get 20-40 percent of the purchase price. At the heart of this fall is the diamond industry’s massive marketing strategy.

 The Great Depression of 1929 in the United States‘Begins. As a result, the demand for diamonds at that time was declining. Demand for this specialty has grown significantly as a result of recent corporate scandals. (Why are diamonds so expensive?)  

De Beers had more diamonds than it needed, but less demand. According to a 1939 survey, one-third of brides in the wedding ring at that time used to get married without any change of ring. 

Ernest Oppenheimer then thinks that diamonds as a product should be brought in such a way that people are more interested in buying diamonds, their special interest in diamonds grows. From that thought, the company moved to the door of the ad agency NW Ayer & Son.

Diamond mining is underway; Image Source: Petra Diamonds

The agency conducted a survey of buyers and found that most people see diamonds as a ridiculous luxury. Then they come to the conclusion that in order to take possession of the money that is in the pocket of the buyer, they must first place it in the corner of their heart. 

The company selects the couple as the target and the main occasion is the engagement. Since then, the agency has been creating diverse engagement rings with the aim of making the diamond engagement ring an attractive engagement gift. 

As a result, the introduction of the diamond ring as an engagement ring in the midst of psychological complications began well. However, behind the scenes, some of De Beers’ tasteful and dazzling advertisements are moving. (Why are diamonds so expensive?)  

One of these was   the ad with the slogan ‘ A Diamond is Forever ‘ , which changed the traditional diamond trading style. 

Since then, through a number of such ad campaigns, the diamond ring has become a kind of engagement material for the common man . Although the rate of giving diamond ring in engagement was 20 percent in 1930, it reached 80 percent in 1950. 

The number of middle-income people became the main target of the De Beers group to increase the number from 20 to 60. To that end, they were targeting middle-income men in various advertising markets. Among them was the popular ‘How can you make two month’s salary last forever?’ The title ad.  

How can you make two months’ salary last forever; Image Source: The Eye of Jewellery

With just two months’ salary, one can give a diamond ring as an engagement ring to his beloved. De Beers focuses on Hollywood in the 1950’s. Because, at that time, fans used to follow various aspects of Hollywood stars. 

De Beers’ ad agency NW Ayer & Son hired Maggie Ettinger , a movie publisher who worked as a diamond promoter in Hollywood.  (Why are diamonds so expensive?)  

His job was to bring the diamond to the audience in a movie event or photoshoot with the option of diamond placement. The ad agency also arranged for details to be published in magazines about the Hollywood stars who wore diamonds. 

In this way, the company is able to create a kind of fascination with diamonds in the minds of women. The song ” Diamonds Are a Girl’s Best Friend ” from the 1953 movie ” Gentlemen Prefer Blondes ” by Marilyn Monroe is an excellent example of Diamond’s influence in Hollywood.

Marilyn Monroe in Diamond Hands; Image Source: New York Post

De Beers received a positive response through these ad campaigns, which was able to increase the demand for diamonds in the market. 

After a single dominance in the engagement ring in the United States, they turned their attention to the international market, in the 1970s. In Japan, the company began to run marketing campaigns quite sparingly. 

When De Beers launched their ad campaign in Japan in 1986, the use of diamond engagement rings was only five percent. In 1971, it stood at 80 percent. In addition to increasing their demand in the diamond market, they also maintained a monopoly on business.  

Diamond engagement ring; Image Source: Pexels

In the 1980s, diamond mining operations in several countries on the African continent were controlled by corrupt governments and militant rebel groups. 

Weapons and ammunition were bought for the conflict by selling diamonds obtained from these mines. De Beers was the only customer of diamonds in these war-torn areas. (Why are diamonds so expensive?)  

Because they did not want the market to be destabilized by the sudden influx of diamonds into the market. As a result of such activities of the De Beers group, the warlord terrorists of these countries became more enthusiastic about extracting diamonds out of greed. 

No one liked the De Beers Group’s monopoly business policy. As a result, a number of countries, including the Republic of Congo, Israel, and Russia, raised their voices against the De Beers Group’s monopoly, reducing the company’s supply of diamonds to the market. 

As a result, the price of diamonds has risen significantly in those countries. So, No one then agreed to speak out against De Beers’ monopoly. De Beers thus became the sole ruler of the Diamond Empire.

Brazilian diamond miners; Image Source: AP Photo / Felipe Dana

However, the current situation is different. De Beers’ former monopoly on the diamond market is no longer in place due to UN intervention . Here are some of the reasons why De Beers Company’s Blood Diamond Purchase has been around since the beginning of the 21st century. (Why are diamonds so expensive?)

There’s also the discovery of new diamond mines in Canada and Australia, the publicity of the company’s unethical ad campaign, and so on. As a result, the company gradually loses its position in the market. 

The company was fined ১০ 10 million by a U.S. court in 2004. By then their monopoly business had collapsed. So at present they are only doing retail diamond business in the diamond market with the exception of ‘supply chain control’.  

According to Statista , De Beers is the second best diamond mining company in the diamond market with 22% market share in 2019. 

However, in 2011 the Oppenheimer family pulled out of their diamond business by selling 40% of the company’s stock to the De Beers Group’s parent company Anglo American De Beers for 5.1 billion. 

Which had been going on for over a hundred years.

De Beers dominates diamond mining; Image Source: Bloomberg

The diamond industry has undergone major changes in the last two decades. There has been a lot of transparency in the supply chain certification and marketing, starting from diamond mining to mining. 

However, the price of diamonds has not decreased. The demand for diamonds as a luxury has always been different, and will probably continue to be so in the future. (Why are diamonds so expensive?)

Feature Image: Wallpaper Access


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