State of the Diamond Industry

“I am getting many phone calls and walk-ins to my store from diamond dealers wanting to buy my diamonds, especially my small melee sizes! It seems like suddenly, over the past 6 months, everyone wants to buy diamonds! What is going on here?”

This is the common question pawnbrokers across the nation are having lately. The purpose of this article is to answer that question and give an unbiased assessment of the current state of the diamond industry. It will also give you an in-depth outline on the best way to maximize your gain when you sell your diamonds, given the high demand.

Why the sudden demand?

There is a huge demand for diamonds, primarily due to two factors – supply/demand and speculation. The demand is coming from overseas, primarily India and China, and it has reached speculative levels. Many factors have led to this scenario: In late 2008, when the global economy col- lapsed, luxury items and especially jewelry took a beating. Retail jewelry demand plummeted and resulted in many bankruptcies, losses and store closures. With virtually no demand, De Beers and other global mining companies halted production of rough diamond mining across the world. In natural response, diamond cutting factories worldwide laid off thousands of their employees and cutters to survive.

The interesting catalyst was that the economies in the emerging markets recovered at breathtaking speeds. In the last few months, demand for diamond and jewelry skyrocketed in markets such as China and India. Unfortunately, there are not enough diamonds to meet the demand, since the mining companies such as De Beers halted diamond mining and production for too long, anticipating a long downturn. Although they are increasing production quickly, the temporary high demand is outpacing supply. As a result, many people have turned to secondary markets to find diamonds. With prices rising rapidly, speculation comes into play. There are millions of carats of diamonds in the market but a good portion of the diamond wholesalers are holding onto them speculating that the prices will raise further. As history has shown us again and again, speculation doesn’t last forever and values can decrease quickly and with- out much warning. When something rises too high too quickly, one must proceed with caution.

What are my diamonds worth?

First and foremost, diamond prices are indeed up. Then the second question is how much? This is an opened ended question because many factors play a part, especially the 4 C’s—Cut, Clarity, Color and Carat weight. For instance, fancy shaped diamonds such as baguettes or marquise are worth less than round diamonds. Most, if not all, pawnbrokers have experienced a scenario where they are quoted a high price over the phone for their diamonds, only to be disappointed when they are later told it is worth a lot less when they mail them in or have the wholesaler come in to price them. This is because many speculative dealers try to entice a pawnbroker with a high price and then try and get the same diamonds for cheap by ‘talking them down’ with explanations such as “this quality is much lower” and so forth. The old saying that “if it’s too good to be true, it probably is…” applies here very accurately. However, there are steps you can take to maximize the value of your diamonds and not be deceived.

Maximizing value for your diamonds – Step 1: Organizing your diamonds

We know that determining the value for diamond breakouts is tough. There are steps one can take to help maximize the value without fully sorting all of the stones which takes a lot of time, effort and money.

Many people have their own definition of “small sizes” which are known as melees. Melee diamonds are all diamonds 9 points and below. The next break would be diamonds from 10-15 points; the next would be 16-25 points, next would be 25-40 points, then 1⁄2 car- at diamonds, 3⁄4 carat diamonds, and 1 carat and up. Next, stones should be roughly examined to evaluate of quality of diamonds in each size group. This is the only way that you, as a pawnbroker, will see exactly what you are being paid for each diamond lot. Our company provides this service and process for every diamond lot we evaluate at no cost to you.

For larger stones, especially stones 1 carat and up, each stone should be graded carefully. Pawnbrokers have asked us in the past what stones are worth certifying. Usually stones with color (J+) and quality (SI1+) should be certified. Round brilliant are the best shapes to get certified. There are many diamond grading labs in the nation which are great for retail and to sell to consumers. However, on a wholesale level the most accurate lab is G.I.A. This lab is respected across the world for their accuracy.

Maximizing value for your diamonds – Step 2: Selling & finding the right diamond buyer

A good rule to follow is that one should continuously sell diamonds, and not speculate on the volatility of the diamond market. Recently, the head of Russian diamond mining giant Alrosa told Bloomberg Television that diamond prices are climbing faster than expected and could create a price bubble, just as they did prior to the financial crisis in 2008. Booms and busts have been in part of our lives as long as history; it is always wise to avoid speculation and sell to respected organizations.

The next question is with so many diamond buyers, who is the right buyer? There is no single “right buyer”, but as history suggests, it is best to work with a tried and tested well-respected diamond organization. With so many diamond buyers, it is critical to make sure they are adequately licensed and legitimate as a diamond company. It is also especially important to work with a diamond dealer that does not deal in any “conflict” diamonds.

Palak Diam, Inc. has been in business for several generations and is a well-respected and proud member of the National Pawnbrokers’ Association. Palak Diam has consistently paid some of the highest prices in the nation for diamonds because we have our own diamond factory overseas. All of our diamonds are “conflict-free” and are sent overseas to our in-house diamond factory, where they are assorted, re-cut, and graded. From there, they are distributed to our 12 sales offices worldwide serving over 18,000 accounts. By selling to Palak Diam, you are selling to a well-respected organization in the diamond industry and at the same time insuring you are selling at maximum market prices.

Maximizing value for your diamonds – Step 3: How to sell your diamonds

There are many ways for you to sell your diamonds to us.

Yes, it is 100% free and insured. We will send a prepaid FedEx box directly to you, you put the diamonds in the box, and we will have the box picked up at your store! We will give you a quote on your diamonds within 24 hours of receiving the box, and if you accept, we will overnight the check to you!

We exhibit at all major trade shows, and will be exhibiting at the 2011 NPA Pawn Expo. Also, the NPA is putting together trading sessions (June 13th and 14th) in an armed secured room for two days before the expo. Appointments needs to be set up for the trading sessions so if you plan on attending the NPA Pawn Expo please call or email us with your what time and day you prefer.

We are constantly traveling across the country so if you have diamonds for sale, please feel free to call us!