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This is another piece on the world’s famous and historic diamonds, although not reprinted from Rapaport magazine, as the blog on the Hope Diamond was.  This information comes from the GIA course materials that I happened across when looking up a diagram that I wanted to use for a facebook post.

The Orloff, like so many of the world’s oldest and most famous diamonds traces it origins to India. In the 1700s, it was (so the tradition goes) one of a pair of diamonds that served as the eyes of an idol in one of southern India’s holiest shrines in the city of Srirangam.

It was stolen by a French adventurer – France and England were then battling for control of India and its wealth. He took the diamond to Madras and sold it to an English sea captain for 2000 pounds sterling. It then changed hands several times ending up in Amsterdam where it was shown to the Russian count Gregory Orloff.

“Orloff was an ex-lover of Empress Catherine the Great. Hoping to regain her favor, the count bought the diamond for 90,000 pounds (some people clearly made a lot of money) and took it back to Russia. In 1774, he gave Catherine the tremendous gem, which has ever since been called the Orloff. Catherine accepted the gift and had it mounted in the Imperial Sceptre. In return, she gave Orloff a marble palace, but saved her sexual and political favors for others.  In 1783, the count died, insane.”

When Napoleon’s Grand Army was about to enter Moscow in 1812, the Russians hid the diamond in a priest’s tomb. Napoleon discovered the gem’s location and was about to claim it as one of the spoils of war, when, according to legend, the priest’s ghost appeared and pronounced a terrible curse on the desecrators.  Napoleon fled in fear without the diamond.

Today, the 189.60 carat Orloff remains where Catherine the Great placed it, atop the Imperial Sceptre.


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The Rapaport Group banned certificates from the European Gemological Laboratory (EGL) on its RapNet trading network (an interdealer online market) several months ago.  The purported reason for doing so was the supposed widespread, consistent overgrading of diamonds by EGL.

Now it is important to understand that EGL USA is not the same company as EGL International or EGL Israel.  It is widely believed within the diamond industry that EGL overgrades on clarity but also to some extent on color.  By overgrades, I mean that they will issue a report with a clarity grade of VS2 or maybe SI1 on a diamond that would be graded SI2 by the Gemological Institute of America (GIA).

Martin Rapaport rather huffily condemned EGL for not grading to GIA standards in his letter, published in the Rapaport magazine, explaining why EGL certs were being banned from Rapnet. This might be a tad disingenuous from a man who publishes prices for the SI3 clarity grade, which, of course, is not recongnized by the GIA.  He is not immune from the charge that he is part of the overgrading problem if we are to believe that GIA standards must be maintained.

EGL Israel is especially egregious in the overgrading of clarity. EGL USA is less so.  In my experience, I have seen EGL USA reports in which the diamond is graded exactly as it would be at GIA.  But there is truth to the conventional wisdom in the industry that the grading standards at EGL are more lax than at GIA.  All of the dealers know that if they buy a borderline stone and want the best price for it when they sell, they get the lab report from EGL.  And it is not just dealers.  I have had many educated retail customers who decline interest in diamonds (sometimes very beautiful ones) if the lab report is from EGL.

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Most people have heard a diamond described as “certified”. What does it mean to say that a diamond has been certified. Do only the best diamonds get certified? Surely a certified diamond must be better than a diamond that is not certified, right?

No, not necessarily.  What it means to say that a diamond is certified is that the stone has been sent to a gemological laboratory to be graded. If the diamond comes back from the lab graded I3 on the clarity scale and “P” on the color scale, it will be a certified diamond, but it will be junk. It will have little to none of the optical characteristics that we normally look for in a diamond and think of as beautiful.  It will be a highly included, yellowish stone with little brilliance, fire or scintillation.

But it will have a lab report.  All certified diamonds have lab reports (certificates) that give the buyer an independent third party verification that the stone is a natural diamond, that it has the dimensions, carat weight, color  and clarity stated on the “cert”.  The existence of the lab report means that the consumer does not have to trust what the sales person says about the size or quality of the diamond. But it does not necessarily mean that it is a good diamond.

So the next time you hear that advertisement on TV from the discount jeweler about 3.00 carat GIA certified diamonds on sale for $1.50, you will know that it probably is certified, but you will understand what that diamond must look like.

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I am going to reprint some short pieces out of Rapaport Magazine on some of the world’s oldest, most famous and historic diamonds.  In Europe, these were historically owned by royalty.  More recently, in the United States, fabulous and famous diamonds have been owned by Hollywood types or captains of Industry.

The Hope Diamond
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There is no SI3 clarity grade in the clarity grading scale of the Gemological Institute of America (GIA).  The GIA lab does not issue lab reports with an SI3 clarity grade.  But the Rapaport Diamond Report, which is the most widely used price sheet in the industry publishes prices for an SI3 clarity grade and the European Gemological Laboratory (EGL USA) issues lab reports with an SI3 grade.

Rapaport and EGL USA did this as a way of recognizing the distinctions New York dealers were making in their trading between eye clean I1 clarity diamonds and I1 diamonds that were not eye clean.  Better, or eye clean I1 stones were simply worth more money than I1 diamonds that were not eye clean.  Thus, a new clarity was born from the distinctions that traders made among I1 stones. First Rapaport and then EGL USA recognized those distinctions. GIA never has.

The problem for calculating loan value is that we always want to loan as much as we can and so we are tempted to use the SI3 clarity grade.  But if we have to sell the diamond, the dealers will want a GIA lab report (EGL is in disrepute) and most SI3 stones will get an I1 grade from GIA.  The 1.50 carat round diamond we have been using as an example is worth $900 less as an I1 than an SI3 and we would be unable to recover what we have loaned out.

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Total Carat Weight

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One other thing before moving to color and clarity:

Total carat weight is not the same as carat weight when it comes to loan value. Jewelers always have pieces with a relatively small center diamond such as a third of a carat and with lots of small side diamonds. The total carat weight of the piece may be a 1.00 or even 1.50 carat or more. The small side diamonds usually have no loan value at all. It costs more to set them than to buy them. So the loan value of the piece will be the loan value of the 0.33 carat (e.g.) center diamond, which could be as little as $150. The customer may have paid $2000 to $3000 for the piece and thinks they have a 1.50 carat diamond ring that should be very valuable as collateral on a loan. But having all the carat weight in a single stone is what maximizes the loan value of the piece of jewelry.

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How Clarity Affects Loan Value

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Clarity is a complex and problematic issue when it comes to defining loan value and I will write at least 2 blog posts on it.  Much of the difficulty lies with the SI3 clarity grade but I will deal with that next time.

For now, let’s go back again to the 1.50 carat round diamond I have been using as an example.  It was an SI1 clarity, G color diamond and had a loan value of $5700.  A 2 grade increase in the clarity grade to VS1 raises the loan value to $6840, an increase of $1140.  A 2 grade decrease in the clarity grade to SI3 decreases loan value to $3840, a decrease of $1860.  Another one grade drop to an I1 clarity grade further decreases loan value to $2940, a $900 decrease from the SI3 loan value and a $2760 decrease from the SI1 loan value.

You can see how important it is to get the clarity grade correct.  There are big jumps and drops in loan value.  And it can be difficult to get the grade correct because I am grading the stone in the mounting the vast majority of the time and diamonds are often set to hide the stone’s inclusions. If I call  it an SI1 and there are inclusions under a prong that make it an SI3, I will have more loaned out on the diamond than the dealers will pay if the customer abandons the loan and I need to sell it

This is part of the risk in my business and the pressure on me when doing the appraisal is always to call it the highest grade I can in order to both lend the most (I earn more then) and to be a financial solution to my potential new customer.  If I let that pressure induce me to make a wrong call, I will then have hundreds or even thousands of dollars too much invested in the diamond.


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How Color Affects Loan Value

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Let’s go back to the 1.50 carat round diamond I was using as an example. At SI1 clarity, a G color diamond would have a loan value of $5700 (3/27/15 price list, down a little from the last list). A 2 grade drop in the color grade to “I” decreases the loan value to $4560 and another 2 grade drop in color to “K” decreases the loan value to $3300. The 4 grade drop in color reduces the amount I can lend by $2400.

Color grading is the most difficult part of the appraisal process in my business. That is because I must almost always color grade the diamond in the mounting and the mounting can impart color to the stoneor otherwise mask it. The proper procedure and the one followed in the gemological laboratories is to have the diamond loose, table down in a grading tray under a grading lamp with a neutral, white background where it can be compared to master color grading diamonds. But in the real world of doing business by lending money on the value of mounted diamonds, I rarely have that opportunity. One of the risks of my business is getting the color grade wrong, usually by thinking it is better than it is, and then having more money in it that the dealers want to pay for the real color.

Dealers often tell me to appraise collateral at 2 color grades lower than it looks to me. They tell me this because if the collateral defaults, then they can buy it at a lower price. They are thinking like buyers and sellers and not like lenders. In our example above, if I really think the 1.50 carat round SI1 clarity diamond is a “G” color but follow their advice and assign a loan value to it as if it were an “I” color, then I lend them $1140 less ($5700 – $4560 = $1140). In doing so, I am less of a solution to their financial need and I forego the interest income that could be earned on that $1140. Only about 15% of my customers will abandon their loans and necessitate a sale of the collateral. So I choose not decrease the loan amounts on the 85% of my customers who are going to pay their loans and to call the color grade as best as I can determine it and lend the money that grade deserves.

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Hull Blog Introduction

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Welcome to the Hull Diamond Blog.

I conceive of this as a place to discuss all things diamond. Since I am in the business of lending people money based on the value of their diamond jewelry in secondary markets, this discussion may focus to some extent on the issues that make a diamond more or less valuable as collateral on a loan. But it can go anywhere that people want to go with it.

So what makes diamond jewelry more or less valuable as collateral? Generally speaking, large, high quality single diamonds have the most value as collateral. Rounds diamonds have more value than other shapes. Forty years ago, marquise shaped diamonds (think football) were the next most valuable but they were supplanted by princess cuts (square) in the 1990s and early 2000s and now the market is moving away from these as ovals and cushion shaped diamonds are more in demand and therefore more valuable. The demand for marquise and heart shaped diamonds is so weak, that when I get presented with one as collateral these days, I estimate the carat weight that would result by recutting the marquise into an oval, and the heart into a pear and then calculate the loan value.

So, a well cut 1.50 carat round diamond with G color and SI1 clarity would have a loan value of $5840. A 1.50 carat oval or cushion of the same G, SI1 quality would have a loan value of $4680. A 1.50 carat marquise diamond with a 2:1 length to width ratio would recut to about (I estimate) a 1.25 carat oval and have a loan value of $2800. Shape matters.

To demonstrate the difference that size makes, a 0.75 carat round diamond of the same quality would have a loan value of $1290 compared to the $5840 for the 1.50 carat: half the size but only 22% of the loan value. And a 3.00 carat round diamond of the same quality would have a loan value of $21,240: only twice as big as the 1.50 carat, but 3.6 times the loan value. Size also matters when it comes to diamonds.

Next time, I will address how difference in color and clarity affect the loan value of the diamond.