Why are Rough and Polished Prices Disconnected?

(ehudlaniado.com) - In the diamond industry, we often hear that the cost of rough diamonds is disconnected from the price of polished diamonds. Many of us wonder how that is possible, especially since the largest cost component of polished diamonds is rough. I’ve always felt that the only way to determine the value of rough diamonds is by the value of the polished diamond outcome from that rough diamond, minus the manufacturing costs and profit. Why start from the price of polished diamonds? Because the power to set the price of polished diamonds is in the hands of consumers. The average price consumers pay for a particular polished diamond sets its value, and from that, we derive the cost of rough diamonds using a reverse engineering calculation. If rough diamonds are valuated correctly – and experience proves time and again that my formula works – then the wide discrepancies in the valuation of rough diamonds can be dramatically reduced. We have knowledge accumulated over generations and great expertise. We must harness this and learn how to continuously improve. Using this professional know-how in combination with my methodology could bring greater financial success to the diamond pipeline, mostly to anyone who deals with rough diamonds as part of their daily diamond activity. Doing so will increase our capital, improve our ability to find bank financing, and result in a much healthier business environment that will allow us to extend our trade into other areas.