Not All Lab Reports are Created Equally

In recent years, diamond grading reports issued by independent gem grading laboratories have become a staple in the buying and selling of diamonds.

Grading Reports are not Certificates

Diamond grading reports are often incorrectly referred to in the trade as "certificates". Certificate, as defined by Princeton.edu is "a document attesting to the truth of certain stated facts". The word certificate implies certain legal consequences, such as a warranty or guarantee of the grading on the report.

No gem lab guarantees their grading and most grading reports contain some version of the following disclaimer:

This report is not a guarantee, valuation or appraisal . . . [this lab makes] no representation or warranty regarding this document or the value of the diamond described herein.

Every legitimate laboratory and trained gemologist/appraiser will tell you that diamond grading is subjective. That being said, there are limits to subjectivity. The accepted industry tolerance of clarity or color grading unmounted diamonds is within one grade (+/-). Mounted diamonds are graded within a tolerance of two grades (+/-) for color. Mounted diamonds are clarity graded with the stated grade being the highest possible grade and a tolerance for two grades lower (assuming that grade setting characteristics are hidden under prongs or bezels).

Anyone can open a “gem lab” and they vary in size from single person operations to those employing hundreds of gemologists worldwide. The jewelry trade generally acknowledges that the most respected reports are the "Diamond Grading Report" and the "Diamond Dossier®" issued by the Gemological Institute of America (GIA) and the "Diamond Quality Document" issued by the American Gem Society (AGS). Because of their respected grading standards, diamonds accompanied by reports from these laboratories will generally have a higher value than those graded by other laboratories with all other factors being equal.

The reason for the difference in value among the reports is this: while most gem labs and jewelers use the same grading terminology for clarity and color originally developed by GIA, many apply the standards more leniently. Likewise, many of the independent gem labs produce grading reports stating values that are more correctly in line with "feel good" appraisals. Typically, the values stated on these grading reports are artificially high, allowing a seller to offer the appearance of a substantial discount.

The trade knows this and you should too.

In one dramatic example of optimistic grading, a client brought in a large diamond for appraisal and a custom ring.

A client brought us a 5 ct pear shaped diamond accompanied by a grading report/appraisal from a lab in New York City (that should remain nameless) addressed "To Whom It May Concern". The report described the quality of the diamond as G color and SI-2 clarity and the report was signed by an unnamed (illegible) Graduate Gemologist from GIA.

After inspection, it was our opinion that the color grade of the diamond was J and the clarity was I-2. The color was overstated on her report by three grades and clarity by two grades. (While we do acknowledge that diamond grading is subjective, no reasonable gemologist could possibly mistake the obvious inclusions present by definition in a diamond with I-2 clarity for the slightly included grade of SI-2.)

The report/appraisal estimated the value of the diamond in a solitaire ring at $84,085. The client stated that the purchase price of the diamond was $20,000. Our research indicated that the $20,000 purchase price was a correct and realistic replacement value for the diamond.

A side note - while a Graduate Gemologist (G.G.) should have a good foundation in identifying and grading diamonds and gemstones, not all are guaranteed to be competent as indicated in the example above.

Even the most respected grading laboratories undergo periods when grading standards shift. As an individual, you cannot be expected to know whether a lab report represents a correct grading or a fantasy. We do not buy our diamonds sight unseen. We do not buy our diamonds based solely on opinions stated on a piece of paper. Neither should you.

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