Why On Earth Didn’t a Flawless 72-Carat Diamond Sell?

It was reported today that Sotheby’s, try as it might, was unable to sell a flawless 72-carat diamond at auction.

72 Carats of Cubic Zirconia, baby. From edejoie on Flickr

The rock, which was appraised at 10-12 million dollars, had a final bid of 9.24 Million, well short of the reserve price. Why wouldn’t the third-largest diamond of its type sell?

Obviously, there’s some concern that the diamond market is weak right now. Sotheby’s is claiming that there was some confusion over exchange rates from international bids, and that may have scared off bidders. But what does it mean, really, when somebody says that the market is weak? Records were being set for demand all last year as nations like China and the oil-rich states in the Persian Gulf began to drive costs up, not down.

Well, for starters, we don’t really know what the value of a diamond is– there are 30 diamond-producing mines in the world, but virtually every gem comes through the Central Selling Organization, run by De Beers. And De Beers, which controls 80 percent of the market anyway, has admitted that they have stemmed the flow of diamonds from Africa in order to drive up the cost. A quick Google search shows how invasive their reach is, and how long people have been willing to prematurely declare their downfall, but De Beers still remains. Frankly, diamonds are a bubble stock, and we don’t know how big it is. So this could be the beginning of a correction towards the actual value.

Alternatively, there’s the faint hope that the Western world is actually paying attention to what’s going on in those 30 diamond mines– the unfortunate fact is that diamonds help drive arms trafficking, finance revolutionary activity and governmental corruption, and often host deplorable conditions in the mines themselves, to boot. This has led to increasing international attention over “conflict diamonds“, although for the moment, De Beers seems happy to assure us that there are no such things commercially available–when you can’t tell the difference–and consumers seem to care only as much as it can dictate how their favorite celebrity will respond.

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