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How Cut Affects Loan Value

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People sometimes use the terms cut and shape synonymously.  But cut means more than shape and the Rapaport Price List has different price matrices for round and fancy shape diamonds.  The Price List is actually for well cut diamonds.  That has a more exact meaning in the case of round diamonds than it does for fancy shapes.

A really well cut round diamond has a table (top facet) that is between 55% and 59% of the stone’s diameter, a depth that is about 59-60%, star facets that are greater than 50% of the length from table to stone edge and lower girdle facets that are 80% or more of the length from the girdle to the culet.  It will also have very good symmetry and polish meaning that the facets will be similarly shaped, not misshapen and be free of scratches, nicks, abrasions, etc.  The Rapaport Price List is meant to be a starting point for negotiations between dealers for diamonds with actually somewhat more lenient standards than these.

While the cut of a diamond may be the most important factor in determining the optics of a diamond; how much brilliance, scintillation and dispersion the stone shows, it has the least effect on loan value. That is because there can be jumps or declines of hundreds of dollars per carat as you move from one clarity or color grade to another on the price list. And, since I am appraising most collateral in the mounting, it can be easy to be off by a grade on the color or clarity.  The mounting limits your view, hides inclusions and masks color.  So I rarely assign a premium to a well cut diamond since the Price List is for well cut diamonds anyway.

I have taken in as collateral many diamonds over the years that were cut in the 1950s, 60s and 70s that are deep and have large tables.  These were cut at a time when manufacturers were more concerned about cutting the largest diamond from the rough rather than the best. If the optics are reasonably good, I usually do not downgrade the loan value because there will be buyers for the stone.  If the optics are poor I will discount the loan value and I have even refused to accept as collateral stones that simply do not have the optical effects that we look for in diamonds and think of as beautiful.

Old European cut diamonds can be beautiful but they are an excuse the dealers use to offer 75% of what they would for a modern round brilliant cut diamond. And so their loan value reflects that market reality. Good cut in fancy shapes is somewhat harder to define but is affected by the length to width ratio of the stone, its depth and the attractiveness of the curves.

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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.