Article: Diamond Grading System

By Richard W. HughesMore from this author

One of the important reasons for the dominance of diamond in the gem market is the existence of a comprehensive and internationally-accepted system of quality analysis. This allows us common folk to buy with confidence, for with a diamond grading report we have an independent "expert" opinion of the stone's quality.

But how "expert" are them experts anyway. Is this opinion, itself, always infallible? Do the different quality steps really indicate genuine differences in quality? Even a dyed-in-the-wool head-in-the-sand colored stonist like me can see the impact diamond grading will have on the rest of the precious stone business, as the colored stone trade continues to move towards some type of grading system. It is with this in mind that we examine some of the problems with the present diamond grading system.

diamonds are a girl's best friend
there comes a time when a lass needs a lawyer;
diamonds are a girl's best friend.
there'll come a time when your hard-boiled employer
thinks you're awful nice, but get that ice or else no dice.

he's your guy when stocks are high, but he'll start to wear when they descend.
it's then that those louses go back to their spouses;
diamond's are a girl's best friend.

So sang one lady, and with good reason. Sales of diamonds account for a large percentage of a typical jeweler's gemstone business, and ain't nobody gonna tell no female different.

From the outset, I've got to say that I believe in the idea of gemstone grading. When a customer is about to lay down a large piece of change for a tiny chunk of ice, colored or otherwise, he/she wants, needs and should have access to an independent opinion of that gem's quality. Trust alone is not enough. A glance at the Bangkok Post and frequent tales of tourist gem rip-offs contained therein will confirm this.

The problems come with the form that this opinion should take. Whatever it is, it should be reproducible to a reasonable tolerance, and it should accurately assess the stone's quality in grades which represent logical steps in quality. Unfortunately, neither of these questions can be answered in the affirmative using the present diamond grading system.

Today, diamonds are graded around the world with the system developed in the 1930s by the Gemological Institute of America (Pagel-Theisen, 1980). Using this system, stones are graded for color and clarity on the scales reproduced in this article (see Table 8.1).

Table 8.1.
The GIA Clarity Scale

Man is, by nature, a "pigeon-holing" animal. Given a pile of diamonds and asked to grade them, he will slot them into as many categories as is humanly possible, and for humans that's a lot of slots. Perhaps too many. "But wait! If two stones are truly different, don't they belong in different categories?" Yes and no. Yes, if your purpose is to separate them into as many categories as possible. We all know that every stone is different, and so if that is our aim we would need an infinite number of slots. But in diamond grading we are attempting to group stones into quality categories, with each step down representing a real, logical difference in quality. This we do not find with the present system of diamond grading. And therein lies much of the problem.

Examples of this failure to reflect real quality steps are given in the current color and clarity scales. For pale-colored diamonds, colorless is best. All agree on this point. Yet on the color scale we find the colorless category pigeon-holed into at least three (D, E and F) or as many as six (D, E, F, G, H and I) different grades, depending on one's eyesight and the position and size of the stone. In terms of clarity we find the same infinite-slot attitude, with the top eight grades lacking inclusions visible to the eye. Now you'll have to excuse me cause I've always been a bit dim-witted 'bout certain things, but what difference does an inclusion make if you can't see it? And this poor country boy can't quite figure out how there can be three different color grades of colorless¹? One possible answer is that grades are smaller to make them more accurate. But if this were true the difference in price between one category and the next adjacent to it should be slight. And let me tell ya' Ace, this just ain't the case.

Take a quick gander at Table 8.2. It shows the prices for 1.00 carat stones from the Jan. 25, 1991 issue of the Rapaport Diamond Report. Here we see the difference in price between a "D-IF" and a "D-VVS1" stone is 37 percent, and the difference between "D-IF" and "E-IF" is also 37 percent. These differences in price for stones of the upper categories are in spite of the fact that the stones, for all intents and purposes, look the same to the naked eye. In other words, today's system does not satisfy the criterion that the grades be spaced such that they indicate real, logical steps in quality.

Somewhere along the road to Mecca, we took the Timbuktu turnoff by mistake. But I can understand how the present mess was arrived at. In the 1930s and 40s, the system was developed in response to an almost total lack of standards. From no standards, however, we've gone to the opposite extreme, where the standards are so stringent that even the experts cannot meet them. The current pricing differences between adjacent categories become even tougher to understand when one realizes that the grades are not completely reproducible. Most diamond grading laboratories will admit to a degree of error of between one half to one full grade for both color and clarity in either direction.

Yes (cough, cough), that's right, one half to one full grade in either direction. This means that an "F-VVS2" today could have a color grade of E, F or G, and a clarity of VVS1, VVS2 or VS1 tomorrow, even though it was graded at the same lab by the same grader each time. With differences like that, we're talkin' some serious dough, Joe, and I don't mean play dough. This may seem too much to take for the milk-and-biscuits crowd down at Merle's Diner and Cufflinks. Why the very idea that those gemolololol…….gem docs……don't know their Ds from their Es has sort of a heretical ring to it. So I'd best give a bit of background. In September of 1981,

The Goldsmith, an American trade magazine, published an article entitled "Diamond certificates on trial: The Goldsmith tests three major US gem labs" (Federman and Farrell, 1981). In it they tell how they tested the accuracy of 145 diamond grading reports issued by three major US gem labs: Gemological Institute of America (GIA), European Gemological Laboratories (EGL), and International Gemological Institute (IGI, New York). Reports on 145 diamonds and the corresponding stones were obtained from one of these three labs. The stones were then graded by a hand-picked team of four gemologists, three of whom had worked for one of the tested labs.

Their findings? Problems were found in 92 out of 145 reports. A whopping 37 percent were stones of which either or both the color and clarity grade was at least one full grade higher than that given by The Goldsmith's graders. None of the labs tested escaped unscathed. Each of the above labs was then invited to comment at the end of the article. Both the EGL and the IGI were repentant, admitting that there was a problem. Bert Krashes of the GIA, however, refused to admit the possibility of error on the part of GIA, stating that he felt that The Goldsmith was unqualified to be judging laboratories. Harumph, harumph! That there is a very real problem can be seen simply by observing the marketplace. Many diamond dealers will freely admit that it is common to submit a single stone for grading as many as six or more times.

If, as Mr. Krashes apparently felt, there was no chance of receiving a better grade, dealers would not waste their money. But if a dealer, whose stone was a 1.0 carat "E-IF" today, resubmitted it and tomorrow it came out "D-IF", he would stand to make over $6,000. At $50 a throw for testing there is room for an awful lot of resubmissions. We ain't talkin' Merle's Diner and Cufflinks no more. We's talkin' 47th Street. The solution? That is a toughie. Clearly there is a major problem here, one that will require more than denial. No one is to blame. The diamond grading system that we have today was developed in the best of faith by the GIA. They don't set the prices, the market does. They just grade the stones. Perhaps Bert Krashes of the GIA summed it up best when told The Goldsmith that the article "only reaffirmed that, in its present state, diamond grading is not a precise science."

But we can change something if it is not working. Those who designed the present system obviously did not foresee the day when there would be huge price differences between adjacent categories. Such a day is already here. The marketplace, by developing huge price differences between adjacent grades, has made clear that it does not understand the diamond grading system and its limitations Well, if the mountain will not come to Moses, then by jove, Moses better get his ass over to the mountain. If the market doesn't understand the present system, then us gem docs had best adapt the system to one that the market can understand. It is hard ball time now, time for the tough decisions. No field can prosper while remaining static.

The current grading system is a good one, but has problems, fixable problems. Diamonds may be forever, but the present diamond-grading methods do not have to be. If we expect our industry to prosper, we must be prepared to make changes that will improve it. And don't give me none of this malarkey about "market inertia." Market inertia-advocates need to study a little history. Try specializing in ancient life forms namely dinosaurs. How can we hope for a useful system for colored stones if we can't get diamonds right? The system we devise needs to meet two major criteria: it must divide the stones into divisions of quality in a logical progression and it must be reproducible within an acceptable degree of error. A logical progression means that in most cases there are clear visual differences between stones at the center of the grades. Today, one tiny pinpoint barely visible at ten power will knock a stone out of the internally flawless category. Does this pinpoint really affect the appearance or durability of the stone, even one bit? C'mon Doc, give it to me straight, I can take it.

"But wait, it affects the rarity." Rarity alone, though, does not a valuable stone make. It is of importance only insofar as it relates to beauty, with the more beautiful being the more rare. This is where we have erred in the present system. Today 10x magnification (or 10.5x, as many graders' microscopes do not really go down to 10x) is the standard for clarity grading. If rarity alone is of importance, divorced from beauty, then why not use 100x as the standard? A stone clean under 100x is certainly more rare than that clean under ten power. But the fact is that rarity cannot be divorced from beauty. As diamonds are not yet, to the best of my knowledge, worn in jewelry with ten-power lenses mounted above them, it seems foolish to have ten power as the standard for clarity grading. I am not saying that magnification shouldn't be used, only that the final grade be based upon what is visible to the naked eye, for this is what will be used when the gem is worn in jewelry.

In a similar way the color scale must be reformed. If the present grades D, E and F all appear colorless when the stone is face-up, then they should be combined into a single grade. Who cares what the stone looks like through the back? I mean, really, Joe, am I that slow? We don't judge its brilliance in that direction, do we? Judging a diamond's color culet-up (as is the current practice) is like wine tasting with your toes. It goes right beyond nonsense into the realm of noooooooonnnnnnsssseeeeennnnnnnssseee. Many of the current color and clarity grades are too narrow, so much so that graders themselves have difficulties getting the same stone in the same category every time.

This means that the grades are too small. They need to be expanded so that stones of different grades have different appearances to the trained, but naked, eye. Let's throw the wee little grades out with the wee-wee, unless there's some difference we can see-see. In developing a system of quality analysis for gemstones we must make absolutely certain that it makes sense to the consumer, for it is the consumer who will in the end have to live with the product. Far too often we spend our time discussing what will benefit the trade, when it is the consumer that should be receiving our attention.

Remember, we will have no business without the consumer. If there is anyone from the world of diamonds still reading, I would like to direct a few final words their way. Step back from your loupes and your stethoscopes and smell the roses. That's what this is all about, right? This thing should make sense, not just cents. And if diamond dealers and graders can't come up with a better reason for doing what their doing than "we've always done it like this," then I say phooey to youey, Louie. Go sell soap instead. And while you're at it, give your logic a bath 'cause it stinks.

Postscript:

I wrote the above article in 1987 from the perspective of someone who cares not one wit about the diamond market, except for its impact on colored stones. Such innocence. After writing this article (and after spittin' a few hayseeds outta my mouth once I'd got the barn door shut), I said "Hey, this's kinda interesting, leastways to this diamant bumpkin. Why don't we ask a few o' them "iceperts" what they have to say about the ideas presented herein. Yeah, we can even ask God over'n Santa Monica."

Well, to put it briefly, them experts didn't have nothing to say. Not now ay knowhow. I wrote to Diamond'dis and Diamond'dat, DiamondToday, DiamondYesterday and DiamondForever. This drew a D-Flawless know-nothing response, even under ten power. And yes, I did write to God. Lotta god it did me. All I got back was an encoded response sayin' they had nothin' to say. But we did hear from a number of people not directly involved in the diamond trade, except at the retail level. This is most disappointing, for it almost seems like the diamond

Richard W. Hughes

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