Commodities and Futures: Dealers get nervous over diamonds' sparkle

DIAMONDS may be forever but they are not necessarily all they seem to be. The jewellery trade loathes any mention of the fact, but the practice of 'enhancing' a diamond - treating flaws in it so they are less obvious - is becoming increasingly common.

Such treatments raise big questions about the value that then attaches to the stone and whether the customer should be (or is being) told what has happened. Within the trade a debate has been raging on the topic for the past couple of years as new methods have come along.

Yet the traditional secrecy with which the industry likes to surround itself has left the ordinary buyer ignorant of the ramifications.

It is easy to see why. Buying a diamond, like getting engaged, is largely a leap of faith; it is all about believing in the intrinsic value of a carbon chip. The last thing anyone in the business wants to do is to introduce doubt into the minds of consumers.

Under the rules by which diamond dealers operate they are supposed to declare any treatment to each other; trading standards legislation would seem to apply the same to sales to the public, at least as long as the retailer was aware of enhancement, though there has yet to be a test case.

But the resources of trading standards officers are stretched. Even dealers on occasion have not realised they were dealing with treated stones, and the chances are limited that a purchaser will ask to have a stone independently checked or certified.

Diamonds are graded, and so priced, according to the 'four Cs' - cut, colour, carat and clarity. The latter depends on how many and how serious are the flaws ('inclusions') inside the stone or on its surface.

They are often tiny and only readily seen under magnification, but even if they are not visible to the naked eye they can interfere with the way in which light passes through the stone, making it less brilliant.

Hence the fewer the inclusions, the better the clarity. The top grade, a flawless stone (extremely rare) is called 'F1'; a stone with only minor blemishes on the surface is known as IF (internally flawless), one with tiny interior inclusions is graded VVS1- VVS2, and so on down to 'P' (pique) graded diamonds that have inclusions visible to the naked eye.

The grade of a diamond makes a big difference to its value. A low P- grade diamond may sell for dollars 1,200 a carat; a VVS1 gem may be priced at dollars 5,100 a carat. A rare flawless stone might cost three times as much again.

There are basically two sorts of treatments that can cosmetically 'improve' the look of lower-grade diamonds by making their flaws less disruptive. The commonest method, around since the 1970s, is the use of lasers to blast away small black flaws, made from tiny specks of carbon.

A more recent arrival is 'fracture filling' - often known as the Yehuda treatment after the man who invented it. This deals with the white marks that come from hairline fractures on the surface and involves filling the fracture with a glass-like substance. It is this treatment that has made the industry distinctly nervous.

To an expert using a magnifying lens, the fact that a stone has been treated will often (though not always) be obvious. But an ordinary buyer will find it difficult to distinguish a treated stone from an untreated one. He or she will simply see a more attractive gem.

But even the professionals are divided about what such cosmetic treatments do to a diamond's value. There are those who would say that like adding arms to the Venus de Milo, the diamond remains 'flawed' and its value is unchanged.

The grading of a stone, which usually determines its value, will not normally be improved by a treatment, at least when certified by a reputable diamond-grading laboratory. The lab will also generally mark on the certificate that the stone has been treated.

Yet clearly there is no point spending money on treating the stones unless they are able to sell for a better price.

Indeed publicity material issued by Sovereign Diamonds of Thanet, the UK agent for the Yehuda treatment, talks of 'savings' of 50-100 per cent over 'equivalent' stones.

Sovereign insists that all its invoices make it clear the stones have been treated - though of course it is unable to say what subsequent purchasers do. It also argues that the current fuss about fracture filling is a storm in a teacup, since coloured stones like emeralds have long been treated to make them more attractive.

Which leaves the ordinary customer in something of a pickle. Only larger and more important stones tend to be certificated; certainly most engagement rings will not have been. The onus is on the retailer to inform the customer about whether a gem has been treated; the poor customer will then have to decide whether the price for the treated stone is fair.

If he or she is lucky, that is. Clearly the less scrupulous retailers may be economical with the truth. The question the trade must ask is whether, when the public realises, diamonds will start to lose their sparkle.