Do the 4Cs still make the cut

The “5Cs and 2Ts” isn’t as catchy as the usual formula, but it might be a better pricing method, according to the author of a diamond-trade guide that claims the 4Cs are no longer adequate.

“One of the biggest misconceptions is that there are only four diamond price factors — color, clarity, cut and carat weight,” says Renée Newman, a graduate gemologist who last year published the third edition of her Diamond Handbook. “In fact, there are other factors, such as the transparency and treatment status. They can have a large impact on price. We [in the trade] may know that, but the consumers don’t, because they just hear about the 4Cs.”

Looking right through them

The Gemological Institute of America (GIA) developed the 4Cs in the 1950s, when the industry considered cloudy diamonds to be industrial quality and didn’t put them into jewelry, the Handbook explains. Today, jewelers do use cloudy and hazy diamonds, but their clarity grades often don’t reflect their lower transparency, even though that characteristic can affect the value.

Newman distinguishes between clarity — a stone’s lack of inclusions and other blemishes — and the first “T,” transparency, which is how well it lets light pass. While a diamond with high clarity will have few or no inclusions, a stone is transparent if a viewer can see objects through it distinctly. Many laboratories don’t take into account subtle differences in transparency, Newman writes.

“I’ve seen hazy and slightly cloudy diamonds with VS clarity grades,” she notes in the book.

How to treat treatments

Very few treated diamonds were on the market when the 4Cs came along, Newman explains. Most diamonds are still untreated now, but it’s becoming a larger minority as sellers seek to improve stones’ color, clarity and transparency.

This second “T” is important, as it hugely impacts the price. An untreated 1-carat, fancy-green, VS-clarity diamond will often fetch more than $200,000, compared with around $5,000 for an irradiated diamond with otherwise identical characteristics, Newman estimates. Treated diamonds are also much harder to resell.

Expanding the ‘C’s

The “cut” part of the 4Cs needs to be two separate categories, she argues. In the 1950s, the trade didn’t differentiate between the shape and the quality of the cut when deciding prices, so it didn’t matter that the same term referred to both things. Now, the cutting style and shape are a distinct price factor from cut quality, with many labs providing a grade for the latter, she observes.

Meanwhile, rising interest in lab-grown diamonds has prompted Newman to consider an eighth criterion, one she plans to include in a revised edition of another of her books. “I left out a ‘C’ that I’m going to add when I redo my Diamond Ring Buying Guide, and that is the creator. Is the creator man or nature?”

Hard to change

Newman is not trying to get traders to discard their 4Cs charts, as the system is so ingrained, she notes. But they should be aware of the additional elements affecting the value of a diamond. That’s why she emphasizes the 5Cs and 2Ts in the Handbook.

“They can’t just completely change over all their advertising and all the materials they have, so I don’t expect people to change the 4Cs,” she explains. “But I do expect them to understand all the price factors.”

Transparency Isn’t Opaque to the GIA

The Gemological Institute of America (GIA) is one of the laboratories that do take transparency into account. It has been grappling with the question for decades.

In 1970, gemologist Robert Crowningshield, then the director of the New York laboratory, wrote that some “misty” diamonds had been difficult to grade, because their color and clarity were otherwise top-scoring.

The lower transparency “did affect the value, but we have been at a loss how to arrive at a meaningful grade,” Crowningshield noted at the time.

The GIA began referring to transparency in grading reports during the early 1970s. Initially, that took the form of a comment. In June 1970, it placed an asterisk next to the internally-flawless (IF) grade of a 13-plus-carat, D-color diamond, with a note saying the stone was “near-transparent due to [an] unusual internal texture.”

By the late 1970s, the lab had begun treating this characteristic as a feature that affected the clarity grade itself.

“Transparency has been included in the GIA’s clarity grading system for nearly 40 years,” Tom Moses, the GIA’s executive vice president and chief laboratory and research officer, tells Rapaport Magazine.

A plethora of parameters

The criteria the trade has traditionally used to grade diamonds are no longer sufficient, concurs David Block, CEO of Sarine Technologies.

“The diamond industry has evolved, and now there are other characteristics that significantly influence the diamond’s value,” Block notes. Physical criteria include milkiness, tinges of color, and specific details about inclusions, such as their nature and where they are located, he explains.

Another element is light performance, which refers to the visual effect when light enters and exits a stone. That feature is “a very important consumer-facing parameter, and is already a factor influencing the value of diamonds, especially in Asian markets,” he adds.

Other characteristics that don’t affect the physical beauty include the stone’s origin and story, treatment status, and whether a diamond is natural or lab-grown, he continues. “The ability to trace the diamond’s provenance and show consumers the diamond’s unique journey will be very critical in the coming years.”

Article from the Rapaport Magazine - June 2019. To subscribe click here.