Is a diamond's price a true measure of its value

[Keeve]

Today’s question (March 23) is: Is a diamond’s price a true measure of its value

Uncle Cecil writes:

… … diamonds have little inherent value; their perennially high price is solely a function of clever promotion and ruthless manipulation of the market. You ask: Isn’t that true of any high-value product? Nope. Take gold, a true commodity in the sense that it’s fungible, as the economists say — like quantities of gold are freely interchangeable. Gold’s purity can be readily assayed and it’s indestructible for practical purposes, making it a reliable store of value. Even now that the world has abandoned the gold standard, gold’s price has held up well on the open market.

That makes plenty of sense to me, but gold was the only “high-value product” he mentioned. There are many other items I’d like to hear about, such as expensive wristwatches, expensive shoes, expensive cars.

I will concede that when one leaves the bargain-basement price category, spending extra does often get you a higher-quality product. For example, a $40,000 car will give you a more comfortable ride than a $10,000 car. But how much better does the ride get in the $200,000 range?

My personal pet peeve is wristwatches. The watch I’m wearing now cost me $30 over eleven years ago. I hear commercials on the radio for heirloom watches that cost two months salary. What makes them different than the diamonds hawked on the next commercial?

[Exapno_Mapcase]

This is the problem with classic columns. They get outdated and can’t reference better, more recent information.

The best new book on diamonds isBrilliance and Fire: A Biography of Diamonds by Rachelle Bergstein.

She doesn’t set out to demolish Epstein, but her history starts far before his. For one thing we learn that the market for diamond engagement rings was actually started in the late 19th century. Everything Epstein says started with Ayer after WWII was being done by advertisers back then.

And Epstein couldn’t see the future. New real diamond finds in Australia and Russia have turned the market over to cheaper diamonds with colors, a change made by advertisers who are now reversing the trend toward pure whiteness to accommodate these realities.

Gold’s price fluctuates greatly and holds its value mostly because so many people have bought into the myth of gold. Far from having intrinsic value, if gold loses that myth the value goes away. That’s true of most high-value luxury goods.

[gazpacho]

@Keeve

My personal pet peeve is wristwatches. The watch I’m wearing now cost me $30 over eleven years ago. I hear commercials on the radio for heirloom watches that cost two months salary. What makes them different than the diamonds hawked on the next commercial?

Expensive watches are Jewelry, so they have a lot in common with diamonds. In that they are used in large part as status symbols so being expensive is a selling point.

[squidfood]

@Exapno_Mapcase

Gold’s price fluctuates greatly and holds its value mostly because so many people have bought into the myth of gold. Far from having intrinsic value, if gold loses that myth the value goes away. That’s true of most high-value luxury goods.

Well that’s true of any holder of value, including currencies used for the valuations. The point that remains relevant in the article is that there’s an agreed-upon standard for pricing for gold, you price it per ounce of pure measured gold (an objective measurement), and it’s fungible, can be divided into arbitrarily-sized units, and you can’t distinguish (say) “conflict” gold from “humane” gold. Whereas for diamonds, you can’t even say this in a relative sense: as you mention, this year, clear may be worth relatively more than colored, next year vice versa.

Not that a column ending with quotes from “the Coming Crash of 1983” don’t deserve an update!