Pricing-Enhanced Diamonds

Just got a call that has me riled up – again.

It was from a “diamond dealer” (“I am selling diamonds on the Internet so I must be a diamond dealer”) who started railing on me for under-appraising a clarity-enhanced stone he had sold to an NGL client. Although I instantly recognized his lack of knowledge in the area, I allowed him to “school” me on why following how GIA grades diamonds was akin to following Adolf Hitler (no, I’m not kidding). I think the main reason for his rant was because my value determination was less than 20% his retail representation based upon the document of his “highly reputable” laboratory in New York. Never mind that by his own admission, my “low” value still exceeded his transaction price by 40%. He couldn’t understand why his lab’s “value” of seven times the purchase price was out of line!

Sadly this is a scenario I see repeated over and over again. If the seller would just represent their goods fairly and not promise the sky, they would not lose their sales when guys like me appraise them. Unfortunately, “guys like them” love to inflate both the “clarity” grade and value of clarity-enhanced diamonds. I used “ ” around clarity because the nature of this enhancement precludes the Gemological Institute of America (GIA) from issuing a grade. They simply identify the process and return the diamond, un-graded. But, since there is a viable market for this product, the industry is left open to “call ‘em as they see ‘em” by establishing “visual-only” equivalent grades. More on that in a minute. But first…

CE Background

This process was developed by Zvi Yehuda and came to market in the mid 1980’s simply known as the Yehuda process. Kind of like a windshield repair, surface-reaching feathers are filled with a glass-like substance rendering them less visible. Many others now utilize this technology but Yehuda maintains the best-known brand name in this business.

*APPRAISER’S NOTE: The clarity-enhancement process is a treatment to fill surface-reaching fractures with a foreign substance to render those characteristics less visible. The apparent color may also be affected by this process. While historically stable under normal wear, this treatment is not stable under the conditions of jewelry repair work. Disclosure is required to anyone conducting repairs to the mounting or to subsequent buyers. The Gemological Institute of America (GIA) does not assign clarity grades to clarity-enhanced diamonds. This report provides a visual-only equivalent for insurance coverage.

The preceding statement is part of every CE diamond we appraise. Yes NGL appraises CE diamonds, but only for the consumer (not the dealers) and then using proper GIA standards in establishing what “visual-only” means. Even though the GIA will not recognize them for grading, a segment of the public likes the idea of buying a diamond “enhanced” through this process. The pricing is higher than the original clarity but less than the “visual only” grading.

So, this glass in-filling makes the diamond appear better but how do we grade it? The GIA says no grade but the public wants to buy it, so the appraiser has to establish parameters for an insurance appraisal. The general rules for clarity grading say to examine five factors of the characteristic inclusions and blemishes and how they appear at 10X magnification.

Those factors are the size, number, location, color and nature of the characteristics. There is no particular order of importance, but a give and take between what relevance each has with respect to an individual diamond. The “nature” factor has to do with what type of characteristic it is. A feather, which is a break in the diamond, i.e. fracture or cleavage is the most severe but if tiny in size has minimal impact. A crystal is not by its nature too detrimental but if dark and eye-visible is another story.

Since feathers are the principal characteristics being affected by the CE process the nature aspect is changed only by a lessened visibility. The feather itself is still there to its full extent. While warranting a higher visual-only grade, the type of inclusion has not gone away. The treatment is not permanent so its removal would immediately downgrade the look of the diamond. These facts cannot be ignored, but most labs pre-grading this material for the diamond brokers and manufacturers seem to not only disregard them but forget to use 10X magnification in the process altogether!

The caller I alluded to at the outset claimed that the GIA process of grading was not the only way and since the gates are wide open for interpretation on CE diamonds, I see what he means. I have examined numerous diamonds that had eye-visible feathers after treatment and still looked I-1 or I-2, only to be graded SI-1 and above on the accompanying “lab” reports. As a GIA Graduate Gemologist, I elect to follow the old school five factors guideline.
Funny that in pricing CE diamonds I am fair and consistent with the product sold so I must know its price. So, why must nearly every CE diamond get high-graded from the original labs and given stupid values only to get refuted when in the hands of a legitimate appraiser?

The issue is further exacerbated by non-disclosure many sales involve or the cryptic way the treatment is revealed. While the Yehuda folks and others have full disclosure, guarantees, etc. most of the sales we see come from second, third or fourth parties. We have addressed that before, so I won’t dwell on the issue. I merely want people to be reasonable in their representations, not hide behind bogus lab reports (which do not obfuscate the seller’s responsibility anyway) and make a fair profit selling something the public wants. Just like kids soccer - everyone wins!

To learn more about clarity-enhanced diamonds and how to identify them, take our Diamond Grading class where you will examine them as well as substitutes and synthetics.