Seeing Triple? SI3 Clarity Grade Exposed

The Situation

Many consumers prepare for diamond shopping by reviewing the Four C's of diamond value as described by GIA.  After looking at the GIA clarity scale a few times, one notices that the I (Included) range is the only range with three separate clarity grades.  This is true.  But then the consumer visits some jewelry stores or looks at diamonds online and sees something that upsets what they have learned about the strictness of grading standards: the clarity grade of SI3.  SI3 is an actual grade assigned by the European Gemological Laboratory (EGL).  One can review the report for an SI3 diamond and see "SI3" actually printed on the cert.

The Problem

GIA established the internationally-recognized diamond grading system that is used by almost all gemological laboratories and members of the jewelry industry.  GIA chose not to copyright the grading system because the system was designed to unify grading standards and to instill consumer confidence in diamonds.  The GIA grading system can be used by anyone without paying royalties.  The "problem" (it is not actually a problem) with the GIA clarity scale is that the clarity ranges produce levels (FL/IF, VVS, VS, SI, and I), and the price differences between two neighboring levels can be dramatic.  In order to select a good quality diamond for an engagement ring, many jewelry professional recommend purchasing a diamond in the SI range or above.  The I range encompasses diamonds that have eye-visible inclusions, which can dramatically affect the appearance and light performance of a diamond.  Thus, a critical clarity call falls between the clarity grades of SI2 and I1.  An SI2 diamond is much more salable than an I1 stone with all other factors being equal.  So with so many diamonds being graded I1, many diamond dealers became frustrated with "borderline calls," or highly-contested clarity determinations between two grades.  Their solution: SI3.

The Truth

This newly-developed SI3 grade could be applied to the diamonds being graded as I1 but believed by some to actually be SI2.  In actuality, a grade of SI3 is, at best, an I1-clarity diamond.  There is no other way of looking at it.  EGL adopted SI3 as an accepted clarity grade in order to stay competitive with GIA and other gemological laboratories.  If a diamond dealer has a stone that he feels GIA might call an I1, he may choose to send it to EGL to get an SI3, which appears to be much more palatable to the consumer.  It would not be quite right to say that the use of SI3 constitutes fraud as EGL will actually print a grading report with "SI3" on it.  Thus, there is some backing to the grade.  There is, however, no doubt that the SI3 grade is intended to deceive the consumer.  The only organization that should have the right to alter the GIA grading system is GIA.  Altering the internationally-recognized grading system for profit is just unethical.  We at Liberty Diamonds do not accept SI3 as a legitimate grade, and we will not trade in SI3 diamonds.

My Recommendation

It is my personal recommendation to you, the consumer, to not purchase a diamond graded SI3.  Instead, opt for SI2 or I1.  The questionability of the SI3 grade will surely negatively affect the stone's actual and resale value.  It is also my personal recommendation that you reconsider accepting a grading report from a gemological laboratory that accepts the SI3 clarity grade as legitimate.

What Is My Jewelry Worth?

Is my jewelry really worth anything?

What a good question!  Almost everyday we have a customers come into our showroom wanting to sell their jewelry.  In this economy, the second-hand jewelry and gold buying markets are thriving.  Signs offering cash for gold are all over our cities.  Though this plethora of advertising may seem tacky, it should actually make you feel comfortable about your jewelry.  Why?  Because you know that you can take a piece of precious metal jewelry and sell it in any city across the country and get at least some money for it.  Precious metals, diamonds, and gemstones are universal currency, and it's been that may for thousands of years.  If you take nothing take nothing else from this blog, please remember that your jewelry has value!

How much is my jewelry worth?

I already told you that your jewelry is worth money.  How much money, however, depends on many factors.  Let's think back to journalism class: who, what, where, when, why, and how.  Remember those key terms?  Well they are also responsible for determining the value of your jewelry.  Let's take a further look:

  • Who - To whom are you selling your jewelry?  Are you walking into a pawn shop in a seedy neighborhood or are you approaching the fine folks at Christie's?  In the retail world, jewelry has essentially two different values: wholesale and retail.  When you buy from a jewelry store, you are paying the retail price for the jewelry.  Regardless of how "discounted" the piece, you are almost surely paying more than the jeweler's cost.  That cost is the jewelry item's wholesale value: the value the jeweler paid a jewelry manufacturer or gemstone dealer for the item.  When you go to a jewelry store, pawn shop, or other immediate-payout route, you become a wholesaler selling your jewelry at wholesale value.  The jeweler has to make a profit on the item by either reselling it or by disassembling it and selling its parts.  If the jeweler were to pay you the retail value (i.e. the value indicated on an appraisal), he would most likely be losing money when he goes to sell the piece.  So when a jeweler says your jewelry is only worth X dollars, and X is way less than what you paid, please do not be insulted.  It's capitalism in action.
  • What - What piece of jewelry are you selling?   If you walk into a jewelry store with a 50-carat D-Flawless diamond, you are going to get a heck of a lot of money for that stone.  However, when you bring in a piece of jewelry that you bought at a discount jeweler, most likely you will receive a very low amount of money (usually equal to market value of the precious metal(s) + the market value of any gemstones in it).  The market value of that D-Flawless diamond is very, very high.  The market value of a mass-produced piece of jewelry is probably very, very low.  Factors that increase the value of what you are selling are brand, provenance (a historical, verifiable story behind the piece of jewelry; usually the piece goes to auction), fashion appeal, craftsmanship, and many others.
  • Where - Where are you selling your jewelry?  This can refer both to both to whom you are selling and where geographically you are selling.  The market for jewelry in a major city is going to be stronger than in a small town.  Selling yellow gold in Southern California is like selling a typewriter to a computer engineer: the buyer assigns little value to the item because he has no use for it.
  • When - When you are you selling your jewelry?  The value paid for your jewelry will most likely be directly derived from the current market prices for the precious metals and gemstones.  If the daily gold price is at an all-time high, that's a great time to sell.  An interesting thing to note is that when the US dollar is devalued, gold value usually goes up.
  • Why - Why are you selling your jewelry?  This actually plays a large part in how much you will receive for your jewelry.  If you are strapped for cash and wander into a pawn shop, you will most likely smell of desperation, and the value will go down.  It's just the nature of the beast.
  • How - How are you selling your jewelry?  There are countless ways to sell a piece of jewelry.  There's the internet, jewelry stores, pawn shops, auctions, friends and family, random people you run into, and many others.  If you can sell to another individual like yourself, you will be able to offer and receive a value closer to the retail price of your piece of jewelry.  At auction, a piece of jewelry with provenance or extreme rarity can command record-setting prices.  However, there how you sell your jewelry brings other factors into consideration like how long it will take for the piece to sell.  A pawn shop or jewelry store will pay you right on the spot, albeit at a lower price.  If you put your piece on consignment or sell to another individual, it may take a while to finally find a buyer.  Time is money, and in jewelry selling, more time on your end usually means more money in your pocket.

So what's with the value on my appraisal?

Values stated on jewelry appraisals are our number one objection to the price we offer to pay for a piece of jewelry.  Legally, there are many different types of appraisals.  However, most consumers are only ever exposed to appraisals for the insurance replacement value.  The insurance replacement value is essentially the amount the insurance company would need to pay out in order to replace the article of jewelry with another piece of comparable quality at retail value and excluding sales tax (Please note that this is not a legal definition and is not intended to serve as reference in legal matters).  More often than not, your jewelry will appraise for more than you paid for it.  This is because the appraiser is factoring a broader, easily attainable retail value.  Tip: It is recommended that you have your jewelry appraisals updated at least every two years to reflect changes in market values.  In selling your jewelry, you will more often than not  receive a value of less than the appraised value.  Refer to the above factors for why this is true.

My personal words of advice: Please do not be insulted by businesspeople and jewelry professionals who offer you a low value for your jewelry.  Many of them will try to play coy so that you cannot judge how much they actually want the piece of jewelry.  In many cases, the person really wants to buy the piece from you, but if they tell you that, you will expect a higher price.  It's just business.

Originally posted by me to LibertyDiamonds.com on 5/7/2010.

A Note on Professionalism

This morning I called a local accounting firm to inquire about the cost of filing quarterly taxes through them.  The receptionist quickly transfered me to an account who did a very strange thing.  I asked him how much he would charge to assist me in the filing of quarterly taxes, and he instead began to educate me on the process.  I began to the questions that were in my head about the whole thing, and he answered each and every one of them.  I was on the phone with him for at least 20 minutes, and he never once said anything like, "Well, you will have to make an appointment for us to answer that" or "That advice will cost you."  When I hung up the phone I was flabbergasted.  Did an account, a very educated professional, really just give me, a random stranger, 20 minutes of no-strings-attached tax advice for free?  Yes, he did.

This got me thinking about professionalism in my industry, the jewelry industry.  Like my fellow colleagues here at Liberty Diamonds, I have extensive education in gemology and jewelry.  I have worked in the industry for seven years serving literally thousands of clients.  I have sold millions of dollars worth of jewelry, and all of this experience has made me very wise about this industry.  There is nothing that excites me more than a client that is truly interested in my opinion and in my knowledge.  Sure, it may sound a bit egotistical, but I, like many people, appreciate being valued as a true professional.  When someone comes to me with open ears and an open mind, I give them more advice and industry "secrets" than someone who approaches me as standoffish.

I have personally encountered many educated and experienced people in the jewelry industry who refrain from offering free education and advice to consumers and colleagues.  Many feel that they are being used by consumers who will just end up purchasing an item from the internet or a competitor.  This is a valid concern as this does occur frequently.  However, in my opinion, diamonds and jewelry are such blind purchases that consumers need some assurance that they are buying from a knowledgeable and reputable company.  After all, if the people at the store cannot explain the differences in value factors, how could they possibly set different prices on the diamonds you see?

Many of our clients here at Liberty Diamonds are engineers.  These individuals are highly educated and are very analytical by nature.  To them, purchasing a diamond becomes an obsession with finding the perfect stone at the perfect price.  Clients like these can easily scare a less-seasoned jewelry salesperson.  Rather than treat inquisitive clients in an offensive manner, we use our knowledge and sophisticated gemological equipment to show them exactly what makes each diamond different and why it is worth the price we are asking.  They appreciate this, and they buy.  It's that simple.

So to you, the consumer, I caution you on purchasing diamonds and jewelry from salespeople and companies that are reluctant to provide at least a basic education of the value factors of your purchase.  You deserve to know what you are buying and why it is priced that way it is.  To my fellow colleagues, I suggest that you try to be more open about offering advice and education to interested consumers.  It is our duty to protect the integrity of the jewelry industry, and this can only be achieved through proper education and professionalism.

Originally posted by me to LibertyDiamonds.com on 5/13/2010.