Buying diamonds in different countries

[Maya Moonstone]

Hi

We are looking to upgrade my engagement ring during the next 6 to 8 months. A recent thread on this forum with regards to diamond/jewelry purchases in China made me think...

Is the price of diamonds in general "fixed" no matter what the exchange rate in the country is compared to the US dollar? That is given it is the same quality diamond and the retail mark-up is the same.

We will have the opportunity within the next year to visit South Africa, where the exchange rate is $1=SAR 6. On our way to South Africa, we will be connecting in Europe. Since we also live in Seattle and are relatively close to Vancouver Canada, we can easily buy in Canada as well. Four different countries, four opportunities, but are all things equal no matter where you are?

What is your opinion?

Maya

 

[DiamondExpert]

Pretty much...might be more expensive outside US, and you might have less recourse in case of a bad transaction.

 

[denverappraiser]

It’s not the country or the address that makes a good jeweler. It’s the character of the people behind the counter and the people behind them.

There are quite a few reasons for differences in pricing from one marketplace to the next. Mostly this has to do with value-added services like financing, setting, warranties, convenience of delivery, display and other attributes that aren’t really part of the diamond itself. I don’t mean to suggest that these things aren’t of value but they don’t generally apply when you try to compare large groupings of stores against one another. All stores in South Africa vs. all stores in Canada is an example of this kind of large grouping.

For this you need to look at things that affect the whole country. Shipping, taxes and currency matters come to mind.

A few centuries ago, shipping was a big deal. For certain products it still is. Tomatoes in January are quite a bit less expensive in Mexico than they are in Minnesota. It used to be that diamonds in Belgium were less expensive than diamonds in Colorado because that was an important manufacturing center. This has changed. FedEx service from Antwerp to Denver is very effective a tiny percentage of the value of most diamonds. Belgian dealers who want to get as much as possible for their goods (which is all of them) will sell them into whatever market they think will serve them the best. If stones sold to Japan brought them as little as a 1-2% premium, there would be a flood of stones flowing into Japan and a flood of Japanese merchants flowing into Belgium pretending to be from other places. The prices would quickly equalize. The same rules holds true for sellers in Africa, Canada, and California.

Currency matters. Most countries have money that can be converted back and forth rather easily and with nominal fees. As with the shipping, this has not always been the case and it continues to be important in some countries. China in particular does not participate in the world currency markets. They aren’t quite playing with monopoly money but the exchange rate from Yuan to Dollars to Euros is nowhere near as clear as it is with most of the world’s currencies. At a street level there may be some gain on the currency issue but you’ll never see it with the big dealers. By this I mean that if you are in a country that has been doing well on the international currency market and you shop in a country that has been doing poorly, you may find old inventory that was priced in the local currency and collect a relative bargain as a result. Don’t bet on this but it does have potential. There is an increase in European traders hunting through Pawnshops in the US Midwest looking for deals for this very reason. This is a tough way to make a buck and it’s not for the faint of heart. There are plenty of other reasons why you might want to avoid shopping at pawnbrokers in Africa unless you know exactly what you’re doing or unless you’re a local resident yourself.

Taxes. This can be a biggie. Many countries have import and export taxes on diamonds, jewelry or both. Many local markets have sales taxes and value added taxes that come into play. This tends to be one of the big advantages of the US. Import (and export) taxes on unset diamonds are zero. (Note to Americans shopping overseas, there is a 6.5% import tax on finished jewelry when you come home). In some countries these taxes can effectively increase the prices by as much as 50%. Some of these taxes are easy to spot and some are buried deeply in the prices. If you’re shopping overseas, it’s probably worth your trouble to read up on this. The consulate of the country you are visiting will be able to give you the skinny and the customs service from your home country can tell you the rules about importing.

In the end, you can skip this entire thing except the first sentence. The most important issue is the character of the people involved. This includes the people who form the legal environment, the store management and even the salespeople. There are fine merchants in every country and there are shiftless shonks in all of them as well. The difference is important.

Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver