If you are planning to invest in diamonds, you'll need two things: (A) a thorough knowledge of diamonds, and (B) . The latter is particularly important in determining the value of and diamonds you are planning to purchase, and should be performed by a party that is independent of any diamond wholesalers with whom you are considering transactions.

This can be challenging, because the entire diamond industry is controlled by a handful of corporate entities throughout the world. It may take a bit of detective work, but the time and trouble taken to locate and secure independent diamond appraisal services can be well worth it when it comes to insuring the value of your investment in loose diamonds.

What Are 'Loose Diamonds'?

Simply put, loose diamonds are just that - diamonds that have not been placed in a setting, such as a ring, bracelet, necklace or other type of jewelry. Investors and usually purchase these from diamond wholesalers, either as a hedge against inflation or for use in the manufacture of retail commercial jewelry.

Diamond Appraisal and Lab Analysis

These diamonds are cut and ready for mounting, and the quality of this cutting work can have a great effect on the value of such stones. A certificate from a gemology laboratory can provide a great deal of objective, quantifiable information about diamonds, including:

-carat (basically the weight and mass of the stone; a carat equals 1/5 of a gram)

-grade (the overall quality of the stone in terms of color and clarity)

-dimensions

-quality of the cut and shape of the stone

Such a report, while important, does not necessarily determine the value of diamonds however.

In contrast to a lab report, a diamond appraisal determines the market value of the stones. Essentially, a diamond appraisal is required in order to place a dollar value on the stones, particularly for insurance and marketing purposes.

While the lab report contains information that remains constant, a diamond appraisal can change depending on numerous factors, not the least of which is market conditions. Due to currency fluctuation and exchange rates, diamonds may command a greater price in some parts of the world than others. Should stones be re-cut, this can also affect the value.

It's a good idea to keep all of this in mind whether you are an investor or are among the diamond dealers seeking stones for commercial jewelry settings.

Avoiding Conflict of Interest

It may seem obvious, but it bears repeating: do not, under any circumstances, have your stoned appraised by the diamond wholesaler. While most are reputable and adhere to ethical standards, it is human nature for a merchant to place an elevated value on his own wares. An independent appraiser with nothing to gain but his own standard fee will provide much more reliable figures.