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Pricing of Diamonds: Methods Followed by the Market
In the Diamond Industry there are many ways to price Diamonds .The pricing can be attributed to the pricing guidelines and the channels of distribution used in select market areas. These market areas influence the policies behind setting the prices for Diamonds in different zones. The jewelry industry regularly monitors these pricing guidelines.
The Diamond sight holder or the company which purchases rough Diamonds form De Beers applies mathematical formulas to the original price paid for the rough Diamond. These calculations are then used as a base for determining the final selling price of the polished Diamonds. These polished diamonds are then sold to Diamond dealers, wholesalers, brokers, jewelry retailers and manufacturers.
The polished Diamonds quality grades (Color, Clarity, Cut and Carat weight) have to be certified by an independent company. After the quality grades have been certified the fair market value of the fine polished Diamond can be identified.
The rough Diamond purchaser or the Diamond sight holder calculates the selling price of the polished Diamonds by adding the cost of cutting, financial carrying cost, cost of the rough Diamond and profit to the polished Diamond.
When the Diamond reaches the market in the Diamond Dealers Club through the cutter, a Primary market is established. This primary market is made at the same price level and the Diamonds are directly offered for sale to the public through this channel.
The retailer in order to cover his cost of doing business magnifies the cost of the Diamond by a large percent, by adding figure called as the Gross Profit.