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Ten Secrets Your Jeweler Won’t Tell You |
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1. Most Jewelry is Marked Up 100 Percent Because jewelry is a product that people don’t buy everyday and jewelry stores only turn their pricey inventory about once a year, the markup is generally 100 percent. The trade refers to this as "keystone". If you see a wholesale catalog, there may be a little code that explains what the markup is: it will say "all prices are keystone" or there may be little pictures of keys. One key means a keystone markup. If you see three little keys, that means the prices shown are "triple key," which means three times the wholesale price. This gives the jeweler the chance to increase the markup on items under $500, like gold chain and simple mountings more. (Or look like a hero by giving you a discount on the "list price.") On line retailers of designer and branded merchandise generally use a keystone markup too. The exception to the keystone rule, both on and offline are diamonds. The markup on diamonds has been squeezed by the existence of a diamond price list called the Rapaport Diamond Report and standardized grading system that allows comparison shopping. But we’ll give you more about diamond prices in the second secret.... |
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2. The "Wholesale" Diamond Price List, Isn't The trade isn't happy that there is a price list for diamonds. The Rapaport Diamond Report is a necessary evil though, and all diamond dealers reference it when they sell. But the Rap sheet isn't really a wholesale diamond price list. There is a cushion built in so that jewelers have some room for profit now that there are customers walking into stores with price lists. Generally, wholesale prices are about 20 percent less than Rapaport. Dealers refer to this as "20 back." Some stones may go for "30 back" or "40 back." Ideal cuts are the exception, in some cases; they may even sell for the Rapaport price. But the grades of diamonds really have more to do with rarity than beauty. But we explain more about diamond grading in the third secret.... |
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3. Diamond Grades Are About Rarity, Not Beauty How good a diamond do you need to buy? Well, we will teach you as much as you want to know about the four Cs but remember this: diamonds are graded UPSIDE DOWN. Even people who grade diamonds for a living can't tell the color or clarity grade when the stone is right side up, which is the only way that you will ever see it once it is set in a ring. So here's the bottom line. If you are choosing a yellow gold setting, NO ONE will be able to tell if your diamond is better in color than a G or H. And no one will be able to tell the difference if you don't buy clarity better than VS2. If you want to buy a better diamond, you are just investing in something that is rarer. As far as beauty is concerned, you are much better off paying for a better cut. But we explain more about cut in the fourth secret.... |
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4. Cut Is the Most Important C The diamond quality factor that makes the most difference in the beauty of the stone is the factor that makes the least amount of difference in its price: cut. The cut of a diamond isn't just its shape (round brilliant, marquise, pear, emerald cut, etc) but the angles, proportion and finish of its profile. The cut of a diamond determines how well the diamond handles light. When a stone is well cut, almost all of the light that goes in bounces around and comes back out, showing up as all those sparkles of brilliance. Basically, it's the same principle as a prism, the angles have to be exactly right to reflect the light back out at your eye. The easiest way to make sure that your diamond is well cut is to buy an "ideal cut" diamond. But it's not an ideal cut unless it has a triple zero cut grade on a Diamond Quality Document from the American Gem Society Laboratory, period. A triple zero ideal cut will sell for a premium, usually about 20 percent. You may even have to pay Rap (the price on the Rapaport Diamond Report for that size, color and clarity.) And actually, the premium is even more because ideal cuts are taller and skinnier than standard diamond cuts. You will have to buy a larger carat weight to get an ideal cut diamond that has the same diameter. Because here at guide2jewelry, we know way too much about diamond cutting (make sure you never ask us about it at a party because we can drone on and on about it until you are bored witless), we would probably go a step further than an ideal cut. We would buy an EightStar, which is a diamond that shows a special eight-ray pattern in a viewer called a Firescope. There are lots of "hearts and arrows diamonds" that have these kind of patterns, which show the symmetry of the cut, but the EightStar is our favorite. Why? Well, the guy who cuts them, Richard Sternberg, is completely nuts. He spends days on each diamond. It's a buddhist thing, zen and the art of diamond cutting. Of course, his irrational attention to detail is completely uneconomical. You have to pay a lot more for an EightStar, but it is perfect: the best possible diamond cut. |
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5. Fluorescence Costs Less (And Looks Better) Diamond dealers are not rational people. Trust us, we know a lot of them. One of the non-rational things about diamond dealers is that they really don't believe in science. Here's the perfect example. Diamond dealers believe that diamonds that glow blue in long wave fluorescent light are bad. Why? Well, very rare extremely fluorescent diamonds are hazy in sunlight. The diamond dealers reason if lots of fluorescence is very bad, than a little fluorescence must be a little bad. So they discount these diamonds. If you ask them about it, they will tell you that they are less rare or that they can tell the difference and that fluorescence affects clarity, or some other lame excuse. The Gemological Institute of America did a study to test expert and non-expert opinions on diamond appearance and fluorescence (science). They showed diamonds with identical grades except fluorescence to a bunch of dealers and asked them which was better. Guess what? They can't tell the difference, except when the color of the original diamond is in the yellowish range (K and down.) And in those cases, the diamond dealers thought that the fluorescent diamonds had better color than they really did. So it was a positive factor, not a negative one. And the Gemological Institute of America checked their database of diamonds and calculated what percentage had fluorescence. and they are actually more rare! And still the dealers insist that fluorescence is bad and discount fine stones with fluorescence as much as 20 to 30 percent. Hey, we aren't complaining. We'll take the discount! Journalists are rational people. But enough about quality. No matter how wonderful that diamond is, people are going to judge it on size. What can we say? Size matters. But we can show you how to get a little more diamond for your money in the sixth secret.... |
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6. Size Matters, But It Goes Up In Steps Diamond pricing is based on rarity, so the bigger the diamond the more it costs per carat. But diamond prices don't increase in a smooth rational curve. They go up on steps because people think in round numbers. The biggest step, not surprisingly, happens at 1.00 carat. People want a one carat diamond. They don't want a 0.96 carat diamond. So a 1.00 carat diamond costs a lot more per carat. And because cutters are trying very hard to hit that magic number, a lot of 1.00 carat diamonds aren't very well cut. The cutters are trying too hard to eke out a few more points. The next step happens at 1.20 carats. So our basic advice is to avoid buying a diamond in a popular size. If you want something above a carat, you may as well go 1.15. You paid for the step up, you may as well go as far as you can at that price level. Now that we have filled you in on color, clarity, cut, and carat weight, you are ready to comparison shop. But there is one more thing you need to know: in order to comparison shop, you need to know about diamond grading reports. Never fear, we'll fill you in, just move on to the seventh secret. |
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7. Some Certs are Just Worth The Paper They are Written On… Diamond comparison shopping seems pretty straightforward. You get a grading report with the color, clarity, carat weight, and a little bit of cut information and you just take the best deal. There's just one problem. There are a lot of companies that issue diamond grading reports. And they don't all grade to the same standards. The standard for grading is the Gemological Institute of America's Gem Trade Laboratory. That is the only report you should accept EXCEPT for an ideal cut stone. The GIA doesn't grade cut, so for that you need a Diamond Quality Document from the American Gem Society, which we talked about in Secret #4. An AGS report is considered as tough as a GIA report as far as color and clarity are concerned but a really important diamond that is also an ideal cut will probably have both. DON'T ASSUME THAT ANY OTHER REPORT HAS THE SAME STANDARD! EGL and HRD reports have pretty good reputations but it is odd when a diamond of a carat or more doesn't have a GIA report. It makes you think that they got a lower grade from the GIA so they "lost the report." (It happens.) And reports from the International Gemological Institute have the reputation of having generous grades. Mass merchandisers love IGI because they have these little laminated certificate cards with fabulous grades and very generous appraisals. They are completely useless. But don't get us started on all the appraisal scams in the jewelry industry. We are saving all of that for the eighth secret… |
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8. Anyone Can Say They are a Jewelry Appraiser OK, there are many fine reputable skilled people who are jewelry appraisers. But appraisals are one of the jewelry industry's many dirty secrets. First of all, any idiot can say they are a jewelry appraiser. You don't have to know anything about jewelry. Most of the people out there doing appraisals are gemologists. They probably have a diamond master set and might even be good at grading diamonds and looking up the price on the Rap sheet. But that may be the extent of their skills. Grading fine colored gemstones and knowing that market? Forget about it, way too complicated. Estate jewelry, not a chance. They don't teach any appraisal skills at gemology school. They teach gem identification. They don't talk about researching markets, how to find comps, what the differences are between retail replacement, liquidation, and estate values. The other huge problem is conflict of interest. Most appraisals are done by retail jewelers. And they are either selling the piece to you, judging a piece that their competition sold you, or evaluating a piece that you want to sell to them. How can they be objective? C'mon, you don't get a real estate appraisal from your real estate agent do you? And please don't tell me that you believe any appraisal from a retailer that gives a value for the item that is more than you are paying. You don't need the guide2jewelry to see through that one, do you? You're beyond our help. And all of this wouldn't be such a tragedy, except for the fact that the appraisal mess means that insurance companies get away with murder when it comes to jewelry losses. They could solve this whole issue by only accepting appraisals from really qualified people. Why don't they? Because so many appraisers are incompetent and don't understand the law or how insurance works, the appraisals are incomplete. And the insurance company in most cases only has to replace your item, not give you the value. They replace it based on the pathetically inadequate description on the appraisal, using their own wholesale sources. It's a total racket. You pay insurance based on the retail value of the piece; the insurance company buys it at wholesale (half) and gives it to you. So what you need is an insurance policy that specifies retail replacement at the place you bought the item. There is only one company that does that nationwide (although a few states require it of all insurance companies). That company is Jewelers Mutual of Neenah, Wisconsin, a non-profit mutual association. They are really nice too. It must be the cheese. All of this basically means that you can trust a GIA grading report but you basically can't trust appraisals. You have to do the legwork on your own. The good news is that a grading report will ensure that you won't buy a laser drilled diamond by mistake. The bad news is that there are undetectable diamond treatments that even the GIA can't detect. Find out all about it in the ninth secret.... |
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9. There is a New Diamond Treatment There are diamonds made in a laboratory, but they are used mostly for industrial purposes. Space shuttle windows, grinding powder, super fast chips, stuff like that. Gem-quality synthetics aren’t cheap enough to be a threat. (The only ones we see are fancy yellows.) Anyway, the main impact of synthetics on the gem diamond market is that the technology used to make diamonds can also be used to improve diamonds. General Electric, one of the world’s biggest manufacturers of synthetic diamonds, now sells diamonds improved by a secret process (which involves heat and pressure.) The GE process doesn’t work on all diamonds. In fact, it only works on a rare kind of diamond known as a IIa diamond. So it’s not exactly a license to print money. The treated diamonds sell for about 20 percent less than untreated diamonds. Why would anyone want to buy one? It isn’t exactly the symbolism that most people want for a marriage. Well, diamond dealers might want to buy one to make a quick 20 percent profit. The treatment isn’t 100 percent detectable. As you might imagine, GE’s new treatment freaked out most jewelers. How would they know if dealers were selling them treated diamonds as natural? If they could be detected later, think of the lawsuits! So the jewelers turned to the Gemological Institute of America to save them. (De Beers, too, but because the justice department is a little sensitive about monopolies and also prosecuted GE and De Beers for price fixing of synthetic diamonds in the 80s, they were careful not to actually talk directly with anyone at GE.) GIA made a deal with GE and Lazare Kaplan, the diamond company who signed up to distribute the treated stones. The deal is that all treated diamonds will have a laser inscription on the girdle that identifies them as treated. Each will be given to GIA for grading and the report will have a note that says something vague: according to GE, this diamond has been processed. GIA did catch a few diamond dealers resubmitting GE stones that they had previously graded with the inscriptions removed. Probably they noticed the same weight and physical characteristics but if a diamond was repolished a little more, it would probably slip though. (The would-be crooks weren’t that bright either. One of the stones had the inscription only half removed.) Because this treatment is only performed on the rare IIa diamonds, GIA can separate out this category for special attention during the grading process. The Institute says that the "vast majority" of these diamonds will be identified by the lab during grading. There aren’t many of these treated diamonds on the market yet and there probably won’t be many for a while. You can protect yourself from the remote possibility that your diamond has been subjected to this treatment by avoiding IIa diamonds. (But asking most jewelers not to give you a IIa will, in most cases, draw a complete blank.) You can also feel reasonably comfortable that a diamond with a GIA report is unlikely to have been treated. There are plenty of rocket scientists and crystal growers
in the former
Anyway, we can learn to live with diamond treatment. Look at colored gemstones: they are almost all treated in some way and people still buy them. But we are getting ahead of ourselves. Colored gemstone treatment is the tenth secret and final secret... |
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10. Almost All Colored Gemstones are Treated Unlike the diamond industry, which is full of big, well-capitalized multinational mining companies, most colored gemstone miners are about one step up from a guy with a shovel and panning basket. (And in many cases that's exactly who mines gems.) So the production is pretty small and inconsistent and dealers have put a lot of effort into maximizing what they have. What that means is that whatever a colored gemstone looks like when it comes out of the ground, someone will try to make it look better. The most ingenious example of this is high-temperature heating of ruby and sapphire. Both of these gemstones are the mineral corundum, which is aluminum oxide. The color is created by trace elements, chromium in the case of ruby and titanium and iron in the case of sapphire. When treaters take ruby or sapphire up close to melting point, more of these trace elements are dissolved, basically (OK, there is some stuff about valence states, and oxygen does go in or out, but you get the general idea.) The point is, heat maximizes the potential of what is already there, which is why the trade decided that it was an acceptable enhancement and could be sold as a normal product. Today, a lot of gems are heated, most at temperatures much lower than that required for ruby and sapphire, including tanzanite, citrine, aquamarine, tourmaline, and amethyst. But things are a little trickier with emerald. Emeralds almost always have tiny surface-reaching fissures and fractures. To make them less visible, dealers fill these fissures with a viscous substance, traditionally some kind of oil, resin or wax. But unfortunately, the stuff in the cracks comes out eventually, or may even dry up in there, making the fissures even more visible. So dealers looked for a better solution. They discovered epoxy resins. The trade has for the most part accepted these substances, although uneasily, because they are a little too close to plastic for gems that sell for thousands of dollars a carat. Will epoxy resins be stable for generations? No one knows. Some gem dealers don't buy emerald anymore, in part because they are worried about liability later, in part because they just don't feel comfortable selling a gem filled with epoxy resin, no matter how tiny the amount. It's a traditional trade, but then again, no one needs gemstones, they are a luxury and the rare, natural nature of the product is the reason you are willing to pay more for a gem than for glass or synthetics. One more gem treatment that I just have to mention. All
blue topaz on the market today is irradiated. The only question is whether it
was irradiated with electrons or neutrons (or both). Neutron irradiation can
leave residual radioactivity. OK, OK, we all know we get radiation going to
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