Art Insights In Depth: Question and Answer on Diamonds

Berkley One’s own Katja Zigerlig and our special guest, Kate Waterhouse, Senior Director of Jewelry Appraisals at The Fine Art Group, answer questions on the evolving diamond market.

The United States is the largest diamond market in the world, and that’s likely due to a strong global culture of putting diamonds into engagement rings. The tradition dates back centuries with the first diamond engagement ring given to Mary Burgundy from the Archduke Maximilian of Austria in 1477. Since then, diamonds have retained a very strong presence in jewelry and popular culture. Recent years have seen changes in activity on the diamond market, and to help explain them (and to share why up-to-date appraisals are very important), Berkley One’s VP of Art, Wine and Collectibles Advisory, Katja Zigerlig, is delighted to speak with Kate Waterhouse, Senior Director of Jewelry Appraisals at The Fine Art Group.

Katja: Diamonds are simply ubiquitous in the jewelry market. Often, the first diamond someone acquires is an engagement ring. Could you review some fundamental terms when discussing diamonds?

Kate: Certainly. Most people are probably familiar with the 4C’s (color, clarity, cut, and carat). There is a lot to unpack here, so I’ll start with the grading scale created by the GIA (Gemological Institute of America). This scale was put together in the 1950’s by the Gemological Institute of America and remains the standard of how we grade diamonds today. The letters DEF refer to what we would call the top of the white diamond scale. Then you start to see a little bit of color as you continue down the scale— first in the body of the diamond and then from the top of the diamond. This continues until we get to the Z’s. These are, in fact, considered a “light fancy.”

Clarity grading starts with “flawless.” It would be important to note here that most diamonds are very rarely flawless (as many clients may describe their diamond). This can be a very confusing point for some. As the grading drops, you may see a little bit of carbon. You may also see some fissures, pinpoint, or cloud.

Recently, cut grading has become more and more of a concern for buyers. While diamonds that are ‘spready’ and have a shallower depth are attractive because they appear larger than they truly are, these stones are far more likely to have a thin outer edge (known as the girdle) which makes the diamond more prone to chipping and bruising at this site. Most recently we’ve tried to stay above an “Excellent” or “Very Good” cut when working with our clients for potential purchase.

Katja: So, clearly the 4 C’s are a starting point for a valuation. What else are you considering?

Kate: In any item of jewelry, we ask the following questions:

  • what are the metals worth?
  • what are the diamonds worth?
  • is it signed by a marker?
  • is it signed by a Cartier, Tiffany, or Van Cleef Arpels (as that can add value)?
  • is it a pair of earrings? Or a brooch?

Each category adds and subtracts from the overall value of the piece in a highly nuanced way. Also, we consider how easily the

item would be replaced in a retail market, or if the piece would be fabricated from scratch again. Could we find it on the secondary market where it would not need to be re-fabricated? And finally, the gemological report is important to include because it’s all the information you could possibly need in one place. Within the United States, the GIA is the most common, but there are other laboratories to consider as well such as SSEF or Gubelin (if a colored gemstone the AGL). If you have a report, be sure to provide the report to your appraiser. This allows the GIA report number to be included in the appraisal, including the date of execution, the color and clarity gradings, and any important notes that the lab felt important to share on the report such a fluorescence grade, diamond type (Type IIa or Type IIb), etc.

If the appraisal is for an estate purpose, we’re going to be looking at fair market value. So, if Mom has unfortunately passed, we would be positioning you with an Estate or Fair Market valuation; we are not going to be giving you retail replacement values. This value is going to be closer to the market value of the piece and may be a significant departure from the retail replacement value you are so used to seeing on your insurance schedule.

Finally, some clients come to us requesting an appraisal, but they’re actually looking to sell a piece. In this case, they need a price listing that is not an appraisal necessarily. This is a valuation for purposes of sale and closer to the fair market value. When you reach out to an appraiser, discuss exactly what you’re looking for with your valuation. This includes covering your goals and assessing the best course of action based on overall needs.

Katja: Diamonds have been collected, traded, and worn for centuries. As you just mentioned, diamonds can be clearly categorized by very scientific grading methods. Do you have any tips for those interested in the ups and downs of the marketplace?

Kate: Yes, you can follow the diamond market rather easily. This is a market that has been tracked for decades now through professionals such as the Rapaport Diamond Price lists. Of course, such reports view diamonds in isolation as a commodity.

For those of us who look at the value of diamonds in jewelry, we also watch retail prices and auction sales. Here in the United States, you have the major semi-annual auction sales occurring generally in June and December. I highly recommend keeping an eye on the auction market, the trends will reveal themselves.

Katja: So how does the lab grown market potentially affect the natural market?

Kate: What’s interesting for most clients to realize is that lab grown diamonds are not synthetic (a common misconception) but are, in fact, chemically diamond material. Synthetics such as cubic zirconia, moissanites, or white zircon have different chemical structures from diamonds. Some synthetics even tend to yellow more regularly over time which is not ideal. Lab grown diamonds are technically a diamond, and NOT a synthetic. This means that they behave like a natural diamond. The creation process begins by taking a very small, thin slab of natural diamond material and placing it through a high-pressure, high-temperature treatment (known as HPHT). This grows the diamond structure.

Like the cultivation of lab grown diamonds, a line can be connected to the process of creating cultured pearls. These are produced when you insert an irritant into a mollusk, and then the mollusk creates a cultured pearl. However, like natural sea harvested pearls versus cultured pearls, there is a stark value difference of natural to “grown” diamonds.

Katja: Have you experienced more demand for lab grown diamonds?

Kate: Many of our clients with natural stones substitute them with a lab grown gem, or even a synthetic, for daily wear. This allows the client to enjoy the look for their piece without the liability of loss or major damage.

If you’re going to be very hard on your jewelry, or if you’re an active person, lab grown goods could be a strong fit because if they are lost or damaged, they will be more affordable to replace. Also, a younger generation is leaning into some of the social and environmental concerns that makes them choose lab growns.

In terms of the long-term value of lab growns, this is unknown. We are already seeing discounting in this space, but at this point we have not had the chance to track this burgeoning market as regularly as the centuries-old natural diamond market.

Katja: This is wonderful information! Thank you for sharing it with us. And readers, please take this as a reminder that while diamonds are in fact beautiful and almost indestructible, an insurance policy with Berkeley One can help protect your brilliant assets in the event of a covered loss. Again, thank you, Kate, for spending your precious time with us. Readers, for a more thorough overview of the evolving diamond market, check out our In-Depth webinar with Kate here.

Homeowners policies often have limitations for valuable items such as jewelry, and that’s where our Collectible Suite policy enters the picture. For people who own jewelry, with or without diamonds, we offer broad risk coverage on a worldwide basis, meaning that your valuables can be insured if damaged from things like fire, flood, and breakage.

Sometimes a stone may fall out of its prong on a ring, or an earring may be dislodged. Our Pair or Set coverage means that you can choose for us to replace the lost item or repair the damaged element of the jewelry. Another option is that you can surrender the undamaged scheduled articles from the pair or set and receive the market value for the lost or damaged item immediately before the loss, up to 150% of its scheduled value.

Some people opt to place their most valuable jewelry items, which often do include diamonds, into a safe at a local bank. Now this can result in reduced premiums due to the superior protection. Some clients even remove their items to wear for special occasions a few times a year if permission from an underwriter is secured beforehand.


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