I don’t recall the last time I was wowed by a diamond. When I see so many diamonds, research special diamonds, and discuss large numbers, that amount of zeros has no longer a meaning. It would take something really special to get me excited. Christie’s has just done it! And I think this will be the last one for this year…
Christie’s Aurora Green diamond, to be auctioned in Hong Kong Image credit: Christies’s
In the upcoming Geneva auctions, Sotheby’s and Christie’s together have over 10 diamonds in pink and blue diamonds to be offered to the bidding crowd on the floor, on the phones, and to those that are bidding online. In fact, to be honest, I am a bit skeptical about the quantity of the special diamonds that will be offered in Geneva. I am concerned that there are not enough bidders for all these special diamonds. My concern is not because they are not worth the current estimates (some are worth even more than the high estimates). It is because even these wealthy people still require liquidity at these levels (unless they reach a side agreement with the auction houses), and they need to have the desire to own so many diamonds at any given one time.
I am concerned that the lack of buyers or bidders will end up causing some of the rare and beautiful diamonds not to sell. In the process, it may give the illusion that the unique diamonds are not worth the acquisition, and in turn will hamper the overall demand of fancy color diamonds, a misleading and unfortunate result.
I can honestly say that both Sotheby’s and Christie’s may be blamed if something like this happens. They are both under tremendous pressure from their investors to perform, as 2015 was a bad year for both in terms of jewelry sales in comparison to 2014. However, selling so many rare diamonds at once can prove to be equally harmful. It remains to be seen in less than 2 weeks what will result at the auctions.
Christie’s Unveils World’s Largest Recorded Fancy Vivid Green Ever to be Graded by the GIA
It is not a mistake nor is it a coincidence that the Fancy Vivid Green diamond to be sold at Christie’s Hong Kong was named the “Aurora Green” diamond. A phenomenon like the Aurora Borealis happens once in history, or at least it has been so up until now. The diamond which bears the name of this natural phenomenon is special for several reasons; the color, size, and clarity as well as a surprising characteristic which is unheard of for this color – its lack of Fluorescence.
Aurora Green Diamond
It has only happened once before in the history of either auction house that a Fancy Vivid Green diamond was available for auction. This shows us true rarity, as even the extremely rare diamond colors like pink and blue come up far more often than this. The only other time a Fancy Vivid Green diamond was auctioned was on November 17, 2009 when Sotheby’s auctioned the famous 2.52 carat Fancy Vivid Green diamond at their Geneva Magnificent Jewels auction. It sold for a “world record” of $3,078,914 or $1.222 million per carat.
The 2.52 carat Fancy Vivid Green diamond Image credit: Sotheby’s
During that time, the world was in midst of the global financial crisis, so reaching such a price is more than significant. It also makes us think what the price could have been if the world was going through prosperity rather than a drought. That is a number we will never know.
Six and a half years later, the largest ever documented Fancy Vivid Green diamond is being offered at auction by Sotheby’s’ rival Christie’s. It is twice the size of Sotheby’s’ green diamond and stands at 5.03 carats (ok, almost twice the size). It is a rectangular shaped radiant cut diamond, a real deep and beautiful Vivid Green
The 5.03 carat Fancy Vivid Green ‘Aurora Green’ diamond set in a pink diamond halo setting Image credit: Christie’s
We know that green diamonds get their color while forming from natural radiation inside the earth. There should be no worries, as this radiation is not harmful. What is extraordinary is that the Aurora Green diamond does not contain any fluorescence, which is not typical for this type of diamond. Even the 2.52 carat Fancy Vivid Green diamond from 2009 had faint fluorescence. This quality is important to its rarity. A collector will take that into consideration when assessing its potential acquisition.
The GIA certificate for the Aurora Green diamond Image credit: Christie’s
Who will buy the “Aurora Green” diamond?
Green diamonds are well sought after by world collectors of diamonds. A Collector will acquire it for the beauty and unique color as well as its rare position in the world. The fact that it is the only one of its kind on earth gives it a certain level of prestige.
I also think that it is not a coincidence that the Aurora Green diamond is offered at a Hong Kong based auction. For the Chinese, the color green symbolizes growing, striving, claiming, healing, and patience among other meanings. (On the other hand, if you wear a green hat, it symbolizes that you have an unfaithful wife, so you have to be careful on how green is used!) Therefore,
Sotheby’s and Christie’s add many Jadeite jewels when they have auctions taking place in Hong Kong.
Between the prestige of the diamond and the fact that it is being offered at the Christie’s Hong Kong auction, it is safe to conclude that most likely, an Asian buyer will be the one to purchase.
The True Value of the Aurora Green Diamond
Christie’s has estimated the Aurora Green diamond to be valued between $16.2 million and $20.1 million, or $3.22 million to $4 million per carat. There has only been a single former transaction that we can use to compare, and that diamond is anything but close in comparison. So how do we assess its value? The answer resembles a good tax accountant: it all depends!
Let’s deduce together how much the Aurora Green is worth and see if Christie’s undervalued or overvalued it, and see how much it should be paid for at auction.
We know that according to the principles of economics, the true and actual value of any good is the final amount paid for it. Any approximate or evaluation is a theoretical assessment and prediction. This makes evaluating the Aurora Green a difficult challenge. So I will give you my own opinion and assessment, but in reality, each potential bidder looking to possibly acquire the Aurora Green diamond will establish his own criteria for evaluating the financial worth of the diamond.
Consider the following:
1) The 2.52 carat diamond was sold in 2009 for $1.222 million per carat.
2) The 5.03 carat diamond is twice as large.
3) The value of a 2 carat diamond is more than twice the value of two 1 carat diamonds.
4) Six and a half years went by since the last such diamond was sold, supposedly collecting momentum for the next time such a diamond would appear.
5) The overall market for unique diamonds has increased a combined average of about 8%
Therefore, based on above:
1) If we use that same value, we will get to a value of $6.14 million total for the Aurora Green, which is false because of claims 3, 4, and 5 (making this an underestimate).
2) If we take claims 4 and 5 into consideration and add 8% per year to claim 1 above, we get $2.02 million per carat (or $10.16 million total).
3) If we take claim 3 into consideration, and check on the RapList (as of May 4, 2016) what a 5 carat D color Internally Flawless diamond costs in comparison to a 2.5 carat of the same color and clarity (for the purpose of seeing the increase in price), we get 1,392/461, or a 3.02 times increase. Considering point 1 is $1.222 and multiply by 3.02 we get $3.69 million per carat ($18.56 million total for the Aurora Green diamond).
4) To claim 3 above some would argue that now we have to take claim 5 into consideration, and so we get $6.1 million per carat ($30.68 million total). Which quite frankly, in my opinion is not realistic, but with unique items like the Aurora Green, there is no realistic approach.
We calculated have an extreme under valuation of $2.02 million per carat. We have calculated an average value of $3.69 million per carat, and we have calculated an outside extreme value of $6.1 million per carat.
What if we took the average between the lowest point and the highest? That would equal $4.06 million. What if we also average the 2 lowest points and 2 highest points? We will get $2.855 million and $4.9 million.
We now have the following points in the assessment: $2.02 million, $2.86 million, $3.69 million, $4.9 million, and $6.1 million.
Let’s remove the lowest and the highest and we are left with $2.86 million, $3.69 million and $4.9 million. But these are 3 numbers, and we need to have a value between 2 numbers, like Christie’s. What do we do?
Ah, why not average the lowest and middle and then highest and middle and this will leave us with 2 numbers? Then we get $3.275 million and $4.295 million per carat, or $16.47 million to $21.6 million total value (Christie’s calculated the price to be $16.2 million and $20.1 million, or $3.22 million to $4 million per carat). My calculation being 1.8% off on the low end is not that bad, but being 7.4% above the high estimate may mean that Christie’s is underestimating the value!
What if Both Christie’s and I are wrong and the Aurora ends up selling at $5 million er carat or $25 million total since it is the only Fancy Vivid Green above 5 carats i the world and it is documented…? it has the potential of breaking the per carat price for any gem in the world…
What do you think of my evaluation method? Agree? Disagree? Do you have another suggestion on how to evaluate the financial worth of this diamond? Remove all emotions from the assessment (i.e. whether or not you think Vivid Green deserves such a high evaluation). Maybe I am totally off, or maybe I am on the right track? I need your help, so tell me in the comments!
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