DIAMOND CUTTING AND CHARGES
Diamond cutting is a highly specialized form of lapidary work using accurate equipment but depending upon the skill of the cutters for satisfactory final results. The cutting trade tends to cluster its shops in only a few places in the world where the necessary talented workmen, equipment suppliers, and suitable rough are readily available. Principal cutting centers are established in Antwerp, New York, and in Israel, with smaller centers in Amsterdam, London, and San Juan, Puerto Rico. In the United States the largest center is located in midtown Manhattan, New York City, but several cutters operate shops in Chicago, Los Angeles, and a few other large cities. The United States cutters confine their work mainly to gems over i/8 carat, the smaller gems being cut in Antwerp and Israel. Continue Reading »

RESALE VALUES AND PROFIT MARGINS
Closely connected with the discussion above are resale values and the profit margins of the dealers who sold the gems. These must be discussed together since one depends upon the other. Only the naive person could believe that a $500 diamond bought today can be sold for the same price tomorrow. While some jewelry stores will give full value on a trade-in toward another purchase of higher value, or perhaps even stretch a point and give credit toward the purchase of an item of equal value, they cannot buy gems at retail value and expect to stay in business. This is not a unique situation by any means, even though the customer may argue that the diamond he wishes to sell is not damaged in any way, as would be the case with furniture, automobiles, or other items which suffer wear and tear. The jeweler must pay for his stock in trade, the services of his sales personnel, advertising, rent, upkeep, and a host of other expenses which are unavoidable. He cannot support all these expenses without requiring a profit on each sale. Continue Reading »

INVESTMENT VALUES OF GEMS
Cut gems, especially diamonds, rubies, emeralds, and others equally vvaluable, are often considered to be “good” investments. It is true that a large amount of money can be placed in a few top-quality gems, and  if the need should arise, they can be more easily transported and disposed  of than bulkier items of equal value. During past wars or severe internal conflicts within certain countries this aspect of gems proved a godsend to persons who had to flee the borders with nothing but the minimum in personal possessions. Fortunately for most persons, this kind of “invest¬ment” is not necessary, and hopefully it may never have to be.

On a long-term basis, perhaps over a period of twenty-five to fifty years, high-quality gems do tend to appreciate in monetary value; that is, a  fine gem bought years ago may fetch many more dollars than it cost. However, since the dollar has depreciated in buying power during the same period, the profit may be a “paper profit” instead of a real one. If there is an actual profit it has to be computed on the basis of the buying Dower of the dollar at the time of purchase compared to its buying power now. Some rarer gems, notably alexandrite chrysoberyl, catseye chryso-beryl, demantoid garnet, fine blue aquamarine, and fine peridot have appreciated in value so much that old gems sold now can often realize a real profit. However, for most gems, about the best that can be said for them is that they have retained considerable real value, perhaps about 50 per cent of cost. More will be said about this in subsequent paragraphs.

INVESTMENT VALUES OF GEMS
Cut gems, especially diamonds, rubies, emeralds, and others equally vvaluable, are often considered to be “good” investments. It is true that a large amount of money can be placed in a few top-quality gems, and  if the need should arise, they can be more easily transported and disposed  of than bulkier items of equal value. During past wars or severe internal conflicts within certain countries this aspect of gems proved a godsend to persons who had to flee the borders with nothing but the minimum in personal possessions. Fortunately for most persons, this kind of “invest¬ment” is not necessary, and hopefully it may never have to be.

On a long-term basis, perhaps over a period of twenty-five to fifty years, high-quality gems do tend to appreciate in monetary value; that is, a  fine gem bought years ago may fetch many more dollars than it cost. However, since the dollar has depreciated in buying power during the same period, the profit may be a “paper profit” instead of a real one. If there is an actual profit it has to be computed on the basis of the buying Dower of the dollar at the time of purchase compared to its buying power now. Some rarer gems, notably alexandrite chrysoberyl, catseye chryso-beryl, demantoid garnet, fine blue aquamarine, and fine peridot have appreciated in value so much that old gems sold now can often realize a real profit. However, for most gems, about the best that can be said for them is that they have retained considerable real value, perhaps about 50 per cent of cost. More will be said about this in subsequent paragraphs.

DIAMOND MARKETING
While there is considerable give-and-take in the entire colored-stone marketing process, such is not the case with the diamond whose fate is closely regulated from mining to cutting. About 85 per cent of the world’s production of diamonds is controlled by the De Beers Syndicate which began its remarkable career many decades ago in the Union of South Africa. Not only does the syndicate control production through a miners’ association, with each mine being assigned an annual production quota, it also requires the miners to sell to a centralized buying organization which assembles all of the rough and markets it in a standard, undeviating procedure.

The problem of disposing of the poor as well as the good grades of gem-quality diamonds is solved by carefully estimating the demand for cut gems in world markets and the prospective consumption of diamond crystals by individual customers, for each of whom a parcel is prepared containing crystals of all sizes and qualities. The customers are notified  when their parcel is ready and they travel to London to the selling organi¬zation headquarters to inspect their parcel in a ceremony known as a ’sighting.” Customers have the choice of accepting or rejecting the parcel, but mostly they accept. They may now cut all of the crystals or sell off parts of the parcel which they do not desire for themselves.

Thus the rough is carefully released to precisely satisfy the demand and to prevent a glut of diamonds on the market which would depress prices.
While this monopolistic practice may be abhorrent to those who believe in free trade, it does have the merit of smoothing out fluctuations in prices and thereby confers a remarkable stability to the gem diamond industry and an assurance of a certain minimum value to each diamond sold. Specific rules formulated by the Federal Trade Commission to pro¬tect buyers of cut diamonds

SALE OF CUT GEMS
Cut gems may be obtained from domestic professional lapidaries or imported from abroad already cut. The choice depends on cost and the cutting quality desired. If small gems are required as “side” stones or for pave work, it probably pays to import them already cut because labor charges abroad -are enough less to compensate for the higher duty which has to be paid on cut gems as compared to rough. This scheme is followed for such gems as small diamonds, rubies, sapphires, emeralds, and zircons. Excellent cutting work is done in Idar-Oberstein, Germany, in Thailand, Hong Kong, and a few other places, but unsatisfactory work is common in India and Ceylon, and it is from the latter places that faceted gems receive the dealer label “native cut,” which is to say, “poorly” cut.

After gems are received, the dealer examines all of them carefully, checks weights and qualities, and then places them in specially folded paper packets called “diamond papers.” Important gems are packaged individually with carat weight, dimensions in millimeters, quality, and price per carat or per piece marked on the flap of the packet. Mediocre quality gems are often lumped together in large numbers in the same packet.

The largest quantity of cut gems in the United States is sold by special¬ists in this aspect of the trade to other members of the trade. They are prepared to send out “approval” selections or single gems, depending upon the requirements of jewelers, or other cut-gem dealers who happen to have a call for a certain gem not in their own stocks. The prices are wholesale or “keystone,” the latter term, when affixed to a price, meaning that it is 50 per cent off to the retailer. The latter may then mark up the gems to assure himself a profit and dispose of them to individual buyers not in the trade, or send them to a manufacturing jeweler to be made up into jewelry.

DISPOSITION OF ROUGH GEMSTONES IN THE UNITED STATES
Gemstones are today imported by a number of small to large dealers, some acting as retailers, some as wholesalers, and others principally to supply their own cutting establishments. To assure themselves of quality, most importers make periodic trips to the gem-producing countries, sight¬ing the various lots offered for sale and bargaining for those which appear satisfactory. These are immediately set aside and turned over to their local agents who then take on the responsibility of shipping the materials to the United States.

At home, the lots are again subjected to careful examination and resorting as necessary into smaller parcels for which the importer has customers. His pricing is once more based upon the probability of sale of choicer material and the possible sale of poorer grades. After prices are established, the material is offered to smaller rough gemstone dealers, to professional lapidaries, and to individuals, mostly amateur gem cut¬ters. Some importers who are expert in mineral specimens make a practice of importing these also. A smaller number of importers specialize in only one kind of gemstone, such as emerald, opal, etc., which they may sell solely as rough or which they sell as finished gems after sending off the rough to professional lapidaries  for necessary cutting.

Because of large variations in quality even within a graded parcel of rough, dealers offer two buying plans to customers, each presenting cer¬tain advantages. The first plan is to buy “grab” lots, where the dealer merely takes a quantity of rough from the parcel without further inspec¬tion, and sells it at a certain price. The second plan is “selection,” where a large quantity is sent to the buyer for inspection and selection, and the rejected material returned, or the buyer selects personally at the sales¬room. Since the buyer is certain to choose only the best within the parcel, this privilege is charged for at a rate substantially higher than for “grab¬bing.”
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EXPORT PROBLEMS
It would be exceedingly naive for any inexperienced individual to travel to a gem-producing country such as Brazil, Burma, Thailand, Mada¬gascar, or Ceylon and expect to bring back quantities of rough or cut gems at bargain prices. First of all, the local experts are fully aware of values, some of them having been born and raised in families whose busi¬ness for generations has been buying and selling rough and cut gemstones. There is no reason to believe that they are ignorant, a view which unfor¬tunately is held altogether too often by visitors from abroad. Second, the natives realize that the major portion of their income is derived from regular dealings with foreign customers who are trustworthy mem¬bers of the gem trade. If they sold anything but trash to the casual visitor, they would imperil their relations with their important customers, and of course, this they cannot afford to do.

In the case of individuals who wish to import gems and rough on a permanent basis, numerous problems exist, which in variety and com¬plexity are simply amazing to a person accustomed to dealing with the relatively simple customs procedures of his own country. Such com¬plexities, and associated problems, are to be expected in Brazil and other Latin American countries, and also in Madagascar, Mozambique, Burma, Thailand, Ceylon, India, and others. Learning how to thread one’s way through the maze of regulations is partially accomplished by obtaining the appropriate publication issued by the U.S. Department of Commerce

EXPORT PROBLEMS
It would be exceedingly naive for any inexperienced individual to travel to a gem-producing country such as Brazil, Burma, Thailand, Mada¬gascar, or Ceylon and expect to bring back quantities of rough or cut gems at bargain prices. First of all, the local experts are fully aware of values, some of them having been born and raised in families whose busi¬ness for generations has been buying and selling rough and cut gemstones. Continue Reading »

COBBING AND TESTING
When time permits, the field buyer turns his attention to the pile of “doubtful” material mentioned above. This contains crystals and frag¬ments of potential gem material which needs to be separated from waste. A typical example may be a large quartz crystal in which smoky quartz alternates with citrine, with the latter of course being much more valu¬able than the former. The crystal may also contain flawed areas which must be separated from the clean areas, and usually the base is milky quartz of no value whatsoever. Continue Reading »