With the ever-increasing popularity of selling an engagement ring at the end of a marriage or as a result of an inheritance, more people are asking, “how can the value of an engagement ring fluctuate?” There are several reasons and explanations for this, primarily due to the components that make up a ring and how they are evaluated. Engagement ring value can be broken down into the materials; metal (usually gold or platinum), a center diamond with potentially few side stones and accent (very small) decorative diamonds. Each of these materials has a value that is completely reliant on the market and general demand over time. It is also important to consider that appraisal techniques have changed over time and different aspects are examined with more significance.
The ring value is set by these main components:
1. Metal value
Metal prices usually hold a spot price.These can fluctuate depending on market supply and demand, and can be easily found online. An average ring holds few grams of metal. Depending on the metal purity, you can very easily calculate the spot price. Buyers who buy the piece from you won’t pay the spot price as they need to incur costs of melting and refining the metal. Expect anything between 80%-95% of the spot market price. It’s important to remember that the metal in an engagement ring is the least valuable element and usually accounts for 5%-25% of the ring’s total value.
2. Center stone (if such exists)
This is the most valuable element of the ring and usually accounts for 75%-95% of the ring’s value, it is also the most complicated element to evaluate and price. The most important thing to remember about diamonds is that they don’t hold or increase in value over time – as much as we all love the “diamonds are forever” sentiment. Only diamonds with unique qualities and history (belonged to royalty) increase in value over time. This is really not the case with most of the diamonds. Furthermore, diamonds are inherently different from one another. It is practically impossible to find two diamonds that are identical. This makes the task of pricing a pre-owned diamond a challenging one, with no real standards to go by.
But it’s even more complicated: diamonds are graded by the famous 4 C’s. Specifically, Color and Clarity are metrics which are determined by the human eye and are not an absolutely-defined metric. As such, you would find discrepancies in a grading of a diamond even by the leading grading labs, including the most recognized of them, G.I.A. Same diamond can be graded differently, using the same laboratory, sometimes even by same grader!
And the plot thickens: a diamond has other metrics less widely known, dramatically affecting the diamond’s value. Metrics like Cut Grade and Fluorescence can impact the diamond value greatly. These metrics and few more are undetectable to the naked eye, even by most jewelry stores. Consequently, most jewelry stores won’t be able to grade and price diamond properly as they are missing the high-end equipment required for the job.
So how can the market still price a diamond?
Like most things in life, diamond value is also driven by the forces of supply and demand. As opposed to gold for example, diamonds don’t have single source that define their value. Prices may vary depending on who you ask. Some benchmarks are being used these days such as the Rapaport pricing sheet. This is not the actual value of a diamond, but more of a guideline as to the range diamond traders would accept.
At the end of the day, the value of a diamond is set by the person who makes the offer. Therefore it is highly recommended to approach as many potential buyers as you can, ultimately assuring you get the highest possible price the market can offer. There are few reliable services out there that aggregate buyers of diamonds and jewelry, Worthy.com is one of them.
One thing to keep in mind, is that the value of the diamond purchased at retail is by no means the value you are likely to get when you resell it. A fairly significant drop is to be expected, sometimes as low as 20%-30% of the retail price. Why? There are two main reasons for that. The first one is the overhead incurred in getting the diamond from the mine, through polishing, to the jeweler and marketing costs. The second would be the high profit margins the jeweler sets for himself and all the others in the “food chain”. All of these combined push the value of a diamond way above its actual market traded value.
3. Accent diamonds
Usually priced by weight.
A total of one carat weight of small diamonds is not equal to single stone of the same weight. Why? Because a bigger gem-quality stone is more rare and usable. The more rare it gets, the higher it’s going to be priced. Usually these stones are priced per Carat around $100-$300 per one Carat depending on the diamond’s quality. If their quality is really low, they would be priced according to the gold weight spot price or even be ignored.
4. Brand and design
Branded rings are almost always valued more. Luxury brands such as Tiffany, Graff, Harry Winston, and Tacori pull the most value in both retail and resale. This is mainly attributed to the fact these companies usually use higher quality materials and come with interesting and unique design. The other, more obvious reason is due to the emotional and social aspects of purchasing a piece by a coveted brand.
Diamond grading costs money and attests to the diamond’s qualities. A significant portion of engagement rings that are up for (retail) sale or that already sold, don’t hold grading documentation. In such cases. It makes it hard for a buyer to understand the qualities of the diamond (remember not all are equipped with the right tools). Therefore, a buyer that will make an offer for a non-graded diamond ring, will do so with a safety margin, not offering an amount that can potentially cause a loss for him due to mishaps in the assessment of the diamond qualities.
On the other side, some diamonds come with grading from 3rd party labs. As the grading should be objective, the recommendation is to grade a diamond either by a GIA certified gemologist or in one of the leading labs. A diamond with grading documentation will be valued more than a non-graded diamond.