How cheap is your love? Diamond appraiser hit

June 28th, 2010 by Philip Brasor & Masako Tsubuku

The prices of love

The prices of love

In May, the Mainichi Shimbun reported that the Gemmological Association of All Japan Co. Ltd., Japan’s largest diamond appraisal outfit, had been accused of purposely overappraising gems. Within the jewelry industry, the news caused quite a stir, since prices are based on appraisals. GAAJ immediately blasted the report as being “not based on true facts,” and said the criticism stemmed from the company’s attempt to readjust its standards with regard to color variations. According to a press release, the GAAJ had been criticized earlier for tending to downgrade diamonds whose color “sat very close to the borders” between grades, and so endeavored to correct the problem, presumably by adjusting the appraisal criteria upward.

Nevertheless, the Association of Gemmological Laboratories Japan has said it will reappraise for free any diamonds that were appraised by GAAJ, in case the owners of those diamonds suspect they may not be worth as much as they thought. Though the monetary value of a diamond is based on “the four C’s” — carat, cut, color and clarity — its intrinsic value is less easy to determine since, for the most part, diamonds are given as tokens of the giver’s love. To a woman who receives a diamond engagement ring from a man, is the love she derives from the stone itself any less intense if she learns that the grade of the color is below what is indicated on the accompanying appraisal certificate? Apparently, the Japanese gem industry thinks so. As one insider told the Asahi Shimbun, “We must work more sincerely so as not to betray the love of the person who gives a diamond.”

Japan is the second biggest diamond market in the world, after the United States, and the bulk of sales are diamond engagement rings. Ninety percent of the engagement rings purchased in Japan have diamond settings. Though diamonds are forever, the diamond engagement ring business has only been around since the beginning of the 20th century, when De Beers, the largest diamond mining and trading company in the world, spun off Forevermark, the company’s retail branch, which not only came up with the “a diamond is forever” motto in 1947, but single-handedly connected diamonds with the idea of everlasting love and commitment. However, it wasn’t until the late ’60s that the idea came to Japan. In 1966, only 6 percent of Japanese men gave diamond engagement rings to their fiancées, and in 1967 De Beers started advertising in magazines, but the most effective promotional tool was advertisements in movie theaters, starting in 1973. The commercials always featured a young Western couple with the man giving the woman a diamond ring. At the time, movies, especially Hollywood movies, were the standard “date course” for young Japanese couples, and the idea caught on quickly. Central to the ad’s purposes was the advice that the appropriate cost of a ring should be about three times the giver’s monthly salary. This number was arbitrary. In the U.S., the advised cost was pegged at twice a person’s monthly salary, but in Japan odd numbers are considered auspicious, and five months’ salary was thought to be too much.

Diamond appraisers started to be trained in Japan in the early ’70s to provide certificates guaranteeing quality with every diamond sold. By the height of the late ’80s bubble era, diamond sales were close to ¥2 trillion annually, but now it’s only about ¥930 billion. In the meantime, the number of diamond appraisal companies has increased, and the competition among them has become desperate in a shrinking market. Whether or not this competition is behind the accusations of overestimating quality on the part of GAAJ, it isn’t clear. According to Mainichi, AGL checked 1,052 diamonds certified by GAAJ and found 139 of them to be over-valued, 27 in the category of color by as much as two grades. The overevaluations occurred between February 2007 and October 2008, and if you think you have a suspect gem (check your certificate), you can go to the AGL home page and find out.

What does it mean to the average consumer? A drop in grade usually translates as decrease in price of ¥20,000 to ¥40,000, but as one jewelry blogger mentioned, what you pay for a diamond engagement ring has more to do with where you buy it than with the appraisal. The thing is, diamonds appraised by GAAJ tend to sell for less than diamonds of the exact same grade appraised by other companies. Also, many people bargain with jewelry stores for engagement rings, so there’s no “set value” for a diamond of a particular grade. In any case, if you think the false appraisal of your diamond engagement ring devalues your relationship with your significant other, you probably need your relationship reappraised as well.

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