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Editor's Desk, Pink Diamonds













The ‘Sakura Diamond’ sold for $HK226.275 million at a Christie's auction in May. Image credit: Christie's
The ‘Sakura Diamond’ sold for $HK226.275 million at a Christie's auction in May. Image credit: Christie's

What it’s really worth

The recent auction of the Sakura Diamond at Christie’s was reported to be both ‘disappointing’ and ‘record-breaking’ – so which was it? ARABELLA RODEN explores the complex factors that determine value.

Fancy colour diamonds are one of the jewellery industry’s most fascinating categories. Like a work of art, their appeal is undeniable – yet entirely subjective. One person’s dream champagne diamond engagement ring is another’s cheap brown stone.

A wise person once told me that things are only “worth” what someone else is willing to pay; that’s as true for diamonds as it is for Australian houses!

Beauty is in the eye of the beholder, and so is value.

Nowhere was that subjectivity more obvious than in the headlines surrounding the auction of a particular pink diamond last month.

In May, a fancy vivid purple-pink stone, poetically named the ‘Sakura Diamond’ after its cherry blossom hue, was auctioned at Christie’s in Hong Kong.

An exceptional diamond, internally flawless and weighing in at 15.81 carats, breathless headlines predicted the Sakura could sell for $US38 million, amid feverish demand for pink stones that has eclipsed even the Sydney housing market.

The hype was – as they say – real.

Yet, the bidding opened at $US20.6 million and rose to a paltry $US29.3 million when the auctioneer’s hammer finally fell – a king’s ransom to some, but well shy of expectations and/or predictions.

Still, the result comfortably eclipsed the $US26.6 million record for the most expensive purple-pink diamond ever sold at auction; that title was previously held by the Spirit Of the Rose, a 14.83-carat specimen sold by Sotheby’s in November 2020.

Dutifully, the headlines proclaimed the exciting news of a record broken; hailing it is as further proof of the robust health of the fancy colour diamond market.

Yet, on the very same day, other headlines declared the result “disappointing”.

Why? It’s all a matter of perspective.

Those who used the benchmark of the previous record were overjoyed, viewing the result as confirmation demand for pink diamonds – and ultra-luxury jewellery – remains strong, despite a challenging year.

”A wise person once told me that things are only “worth” what someone else is willing to pay; that’s as true for diamonds as it is for Australian houses! Beauty is in the eye of the beholder, and so is value.”

Meanwhile, those whose expectations were shaped by hype and high estimates – the latter often being used to generate the former – were left underwhelmed.

Some even speculated that the COVID-19 pandemic had “seriously weakened” the fancy diamond category overall.

There are several lessons to be learnt from this tale.

The first is that auction prices have never been a particularly accurate yardstick for the health of any jewellery category, and especially not fancy colour diamonds.

The types of stones that end up under the hammer at Christie’s and Sotheby’s are in a category of their own, with very few available each year, and purchased by a select handful of collectors and jewellery houses.

As much as tech billionaire Mike Cannon-Brookes snapping up Point Piper’s Fairwater estate – once owned by Lady Mary Fairfax – for $100 million tells us nothing about the average Australian mortgage, or housing affordability in general.

It’s a trap often seen in the art world, where journalists will measure the ‘strength’ or ‘weakness’ of the auction season by comparing the aggregate of final sales prices against aggregate pre-sale estimates.

If the sales match or exceed the estimates, the market is declared robust; conversely if they are at the lower end or below estimates, the market is in decline.

Yet auction estimates are not tethered to external economic factors, but rather calculated based on the reserve, or what the seller is willing to accept.

Some of this can be a product of careful market analysis, but it may be equally weighted by psychology and intuition.

Competition from other businesses can also incentivise auction houses to inflate the estimate in the hope of winning the account. However, a higher range can discourage potential bidders.

Lower estimates entice bargain hunters into the fray – and any resulting bidding war could push the final sale price far higher than the estimate, which makes the auction house seem more impressive.

For these reasons, it’s impossible to say whether the Sakura Diamond was ‘overvalued’, as ‘value’ by its very nature is subjective.

The second lesson is that those who manage their expectations are rarely disappointed.

Healthy anticipation is all well and good, but when expectations are formed based on assumptions, emotions, and opinions – rather than facts – it’s easy to be caught off-guard when things don’t go as planned.

And when expectations aren’t met, we can be led to the wrong conclusion.

To combat the ‘expectation gap’, it’s important to utilise perspective; no situation occurs in a vacuum, and understanding context is key.

Yet perspective is often the first casualty of hype, especially when stuck in a bubble or echo chamber, when it can be difficult to separate the factual from the fanciful.

In the case of the Sakura Diamond, reading all the headlines provided the necessary perspective to contextualise the result.

When it comes to unique gemstones, rather than beauty being in the eye of the beholder, perhaps we should say beauty is in the eye of the believer – after all, people’s hearts tell them what to believe, not what to do!
 

Conflicting headlines

CNN headline, 24 May 2021
CNN headline, 24 May 2021

Express.co.uk headline, 23 May 2021
Express.co.uk headline, 23 May 2021

 

WATCH VIDEO OF SAKURA BEFORE THE AUCTION

 

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ABOUT THE AUTHOR
Arabella Roden • Editor

Arabella Roden is the editor of Jeweller and writes in-depth features on the jewellery industry. She has ten years media experience across Australia and the UK as journalist and sub-editor.

Peter W Beck
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