Friday, December 4, 2009
Prices of Diamonds Graded by 3 Different Laboratories
An analysis of trading prices showed that the trade adjusts prices based on expected strictness of diamond grading reports.
To confirm or deny the trades expectation of grading strictness, the authors conducted a small 17 diamond independent survey of GIA, AGS and EGL USA lab grading. The diamonds were anonymously submitted from three different sources.
In half the cases AGS clarity grading was one grade stricter than GIA. In two thirds of cases EGL USA color grading was one grade softer but clarity grading in a third of cases was stricter than GIA. Industry opinions were confirmed and by large each lab graded consistently to its own apparent standard, considering the high degree of human subjectivity involved.
In conclusion: The study confirmed that business to business Internet listings effectively priced diamonds graded by these laboratories
Diamond prices are dramatically dependant on the 4C's (carat, color, clarity and cut); a difference of only one color or one clarity grade can result in price variations of 3% to more than 25%.
For many years, buyers and sellers determined diamond grades by themselves. But in the 1953 the Gemological Institute of America (GIA) established a grading system for color and clarity and began using this system in its independent diamond grading laboratory. Today there are many large and small gemological labs world-wide that offer third party diamond grading services. Trade insiders believe that some labs are stricter and more consistent, while other labs are softer (i.e. give higher grades) or may be less consistent. Consequently it is believed the diamond trade adjusts diamond prices based on the lab that issued grading reports.
The only published source of price comparison the authors are aware of, between diamonds graded by different labs, is listed on Polishedprices.com:
Certificate Calculation factors according to Polishedprices.com
Today’s consumers are learning more about diamonds and pricing. Websites like Pricescope.com and others have contributed to the public's greater knowledge. Many have learned that diamonds graded by GIA-GTL or AGSL are priced at premiums compared to diamonds with reports from other labs. The current study compares lab strictness but importantly, for the first time that the authors are aware of, this survey includes a pricing and value comparison.
The prices of a significant quantity of diamonds, more than 50,000, are publicly listed on-line and GIA, EGL USA, and AGS graded diamonds were represented in large enough quantities to be included in this study.
The reason for a grading lab to give softer grades is to get more business from diamond manufacturers, retailers or wholesalers who want to increase their profits by selling diamonds given higher grades at higher prices. However, EGL USA has claimed recently to have been grading stricter.
This survey is the first in a decade that the authors are aware of, was not intended to prove that any lab is better than another. Diamond grading is a subjective art. The consumers should be aware that a grading report is that labs opinion, and not a fact. This was illustrated by the fact that none of the 17 stones were given the same grade for both color and clarity by all 3 labs. One of Pricescope's main intentions with this survey was to compare the relative trading values of diamonds graded by various labs.
2. Method of Survey
This survey was funded by Pricescope, including the expenses of two additional grading reports and shipping of the diamonds. None of the surveyed labs were made aware of the survey.
Three labs were surveyed:
These three labs were chosen because there are reasonable sized commercial data bases of pricing information to enable cost comparisons.
Pricescope approached three independent diamond vendors: DirtCheapDiamonds.com, EngagementRingsDirect.com and Whiteflash.com to provide diamonds from their inventories. These stones had already been graded by either GIA-GTL or AGSL and they were then sent to the two other grading laboratories. The vendors were aware of the purpose of this experiment and the need for secrecy. They knew that other vendors would be participating in this survey, but they were not informed of the identity of the other vendors.
In total 17 round brilliant cut diamonds were selected for the survey, but one was inadvertently sent to GIA-GTL twice (and received different clarity grades). They ranged from 0.6 -1.25 carat, E – J color and VVS2 – SI2 clarity ranges. The sizes and qualities were chosen to represent frequently traded range of diamonds. The vendors were asked not to deliberately select stones that they considered to be border line examples or stones that in their opinion had been "missgraded". See Appendixes I - V for all diamonds' details.
Each of the diamond vendors independently submitted their already lab graded diamonds to two additional grading labs. Namely:
DirtCheapDiamonds.com selected 6 diamonds (5 with AGSL and 1 with GIA-GTL reports) and submitted them to GIA and EGL USA
EngagementRingsDirect.com selected 4 diamonds with GIA-GTL reports and submitted them to AGSL and EGL USA
Whiteflash.com selected 7 diamonds with GIA-GTL reports and submitted them to AGSL and EGL USA.
All diamonds and all 3 grading reports were then shipped to David Atlas, GG, NGJA, ASG Accredited Gem Appraisers, Philadelphia, PA for additional professional evaluation and to review the grading results.
3. Summary of the results
Diamond grading is not a science; it is a subjective skill. As mentioned, none of the 17 diamonds in this survey was given the same grade for color and clarity by all three laboratories. Due to the subjectivity of human color and clarity grading, it is virtually impossible to say whether one or another grade is absolutely accurate. Instead we decided to consider whether two of the labs grades were stricter or softer compared to GIA-GTL grades. We made this decision because GIA-GTL is the largest lab and is considered as a market leader.
To underline the subjectivity of diamond grading it is worth noting that stone #10 already had a 6 month old GIA-GTL report, but was inadvertently resubmitted to GIA-GTL (it was to have been sent to for an AGSL report, which explains its absence). The color was given the same grade, but the clarity on the GIA-GTL report was VS1 on the earlier October 2003 report and VS2 on the April 2004 report. In discussions with the GIA about this particular stone they noted that in their private records on both occasions that it was a border line VS1 / VS2. The authors chose to include the stone at its softer GIA-GTL grading.
3.1. Relative comparison of the Clarity and Color grades
Table 1.a. Carat, color and clarity of the diamonds used in the survey
No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Carat 0.74 0.78 1.08 1.11 0.62 0.60 0.62 0.62 0.71 0.70 0.79 0.71 0.75 1.13 1.02 1.23 0.70
GIA F F H G I I G H H H E E H J E G H
AGS F F G G I H G H H n/a E E H I F G H
EGL E E G F H H F G G G E E G I F G H
GIA SI1 VS2 SI2 SI2 VS1 VVS2 VS1 VS2 SI2 VS1 SI1 SI1 SI1 SI2 VVS2 VS1 VS2
AGS SI2 VS2 SI2 SI2 VS2 VVS2 VS2 SI1 SI2 n/a SI2 SI2 SI1 SI1 VS1 VS2 SI1
EGL SI1 VS2 SI2 SI2 VS1 VS1 VS2 VS2 SI2 VS2 SI1 SI2 SI1 SI1 VVS2 VS2 SI1
Table 1.b. AGSL and EGL USA Grading Compared to GIA-GTL
AGSL (out of 16) EGL USA (out of 17)
Clarity Stricter 9 (56%) 6 (35%)
Same 6 (38%) 10 (59%)
Softer 1 (6%) 1 (6%)
Color Stricter 1 (6%) 1 (6%)
Same 12 (75%) 4 (24%)
Softer 3 (19%) 12 (71%)
Figure 1. Difference in Clarity Grades Compared to GIA-GTL. Below the line corresponds to softer grading (higher grade) and above the line is stricter grading (lower grade)
Figure 2. Difference in Color Grade Compared to GIA-GTL. Below the line correspond to softer grading (higher grade) and above the line is stricter grading (lower grade).
3.2. Cut Grades
Comparison of the contentious issue of cut grades was not possible, since GIA-GTL reports do not rate a diamonds proportion based cut quality. Under the heading ‘Proportions’ are depth percentage, which is the depth divided by average diameter and multiplied by 100, table size as a percentage of the average diameter, the girdle in descriptive wording and finally culet size description. A sub heading ‘Finish’ lists polish and symmetry. Both other labs give crown and pavilion information; AGSL gives both angle and percentage data and EGL USA gives crown height and depth percentages. GIA-GTL noted under comments any diamond with a crown angle greater than 35° or less than 30°.
The information provided by AGSL and EGL USA enables proportion grades to be checked with cut grading systems provided by the authors on www.pricescope.com/cutadviser.asp and www.gemappraisers.com.
3.2.1 Proportion Grading
AGSL has an optional report system for round diamonds that grades a diamonds cut against a comparatively tight set of proportions. The top grade is ‘zero’ and the worst grade is 10. AGS 0 has become synonymous with the term ‘Ideal Cut’ in North America (stones # 5 to # 10).
EGL USA produce optional reports with proportion based cut grade results (e.g. stone # 7 is called EGL IDEAL PLUS).
Researchers in the field of cut studies debate the use of parameter ranges for cut grading round diamonds. It would be fair to say that all three labs (and most others) are un-satisfied with the parametric based approach. GIA and AGS now recognize that diamonds with the steepest crown and deepest pavilion, within a cut grade category, are not as attractive as many diamonds of lower grades, with combinations of shallow crown and deep pavilion, or steep crown and shallow pavilion. The same is true for shallowest crown and pavilion combinations. The GIA is conducting a costly decade long cut study to establish a cut grading system. This has taken longer than planned. At the 2004 Basel GemFest GIA released information indicating that its new cut grade system will account for the above mentioned relationship between crown and pavilion angles.
3.2.2 Symmetry and Polish
Symmetry and polish were graded for all stones by all three labs. The table below describes the terminology used by each lab.
GIA-GTL AGSL EGL USA
Excellent Ideal Excellent
Very Good Very Good Very Good
Good Good Good
Fair Fair Fair
Poor Poor Poor
Generally the Polish and Symmetry grades of GIA-GTL and AGSL coincide with each other for Excellent/Ideal and Very Good and Good grades. All three labs gave similar grades for diamonds rated as Good. However EGL USA reported mostly Good or Very Good Polish and Symmetry for diamonds that were graded Excellent / Ideal by GIA-GTL and AGSL respectively
3.3. Clarity Plots and Comments
A comparison of the diamonds and the plots from all three labs showed that AGSL report plots had a consistency and greater degree of detail than the GIA-GTL reports. The plots of the EGL USA documents were close to the quality of AGSL and contained adequate detail. See Appendix V.
GIA-GTL made the most use of comments (12 clarity or surface feature comment on a total of 18 reports), followed by AGSL (10 such comments on 16 reports), however EGL USA made none. GIA-GTL’s stated practice is to plot only the marks that set the clarity grade, with others often being referred to in the comments section; this policy was reflected in the absence of a few inclusions which were reported in the comments section. GIA-GTL plotting was also somewhat less intensely drawn.