That's Quite a Rock 'Rough' diamonds -- some looking more like gravel than gems -- edge into the jewelry market By YING WU July 28, 2007; Page P1 From Tiffany to De Beers, a new look in diamond jewelry is on the rise: uncut diamonds that to the untrained eye can look more like gravel than gems. Known as rough diamonds, these are the stones in their natural state, before they've been cut with the facets that give diamonds the sparkle, brilliance and clarity they are known for. In colors from milky white to yellow, green and brown, the large, uneven stones often have a cloudy appearance. Unpolished Look: A rough-diamond ring. For jewelers, these stones have another appealing quality: The wholesale cost of uncut diamonds is far below that of cut and polished gems. Yet some customers are proving willing to pay tens of thousands of dollars for them. At De Beers's three U.S. stores, which started offering rough-diamond jewelry two years ago, one of every five pieces sold now features rough diamonds. A $45,000 rough-diamond necklace is displayed prominently in the window of the company's Fifth Avenue store in New York. Meanwhile, Bergdorf Goodman added rough diamonds to its jewelry selection last September. Retail prices for rough-diamond jewelry vary considerably, from $600 for a small uncut diamond set in a stainless steel ring at De Beers to $750,000 one-of-a-kind necklace of pearls and rough diamonds by Frank Gehry at Tiffany. But because some of the usual key standards for assessing a diamond's value, such as cut and clarity, don't apply to uncut stones, it can be tough for consumers to evaluate pricing. "It's pretty much a blind purchase for consumers," says Tom Moses, a senior vice president at Gemological Institute of America, which set the widely used "4C" standards (cut, color, carat and clarity) for cut diamonds. The institute doesn't have a system for evaluating uncut diamonds. Diamonds have long been marketed for their timeless style in the world of luxury goods. But in a time of quickening fashion cycles and a craving for the new and different, even the diamond industry has begun looking for novel products. In recent years, colored diamonds, in shades like yellow and pink, have become more popular. Industry observers say the uncut diamonds are being marketed to a subset of customers who increasingly want things that are both exclusive and subtle, conveying status only to people in the know. "Luxury consumers are maturing "beyond the 'look at me' phase," says Milton Pedraza, chief executive of the Luxury Institute, a market-research firm. The rough stones also tap into the current popularity of all things natural in the fashion market. "It's a fashion twist on diamonds," says Lisa Kazor, senior vice president of precious jewelry at Neiman Marcus, likening the trend to black diamonds, which first appeared on the market eight years ago. Many rough-cut diamonds used in jewelry are unsuitable for cutting because of their shape or flaws in the stone. In some cases, a potentially cuttable rough stone is selected for a piece of jewelry because it has an unusual shape in its uncut form. Generally, however, experts wouldn't advise consumers to consider cutting into a rough diamond they've bought in a piece of jewelry: The odds of finding a valuable cut diamond inside are fairly low. Rough diamonds still represent only a tiny portion of the market for diamond jewelry. Last year, consumers around the world spent $68 billion on diamond jewelry, says Ken Gassman, president of the Jewelry Industry Research Institute. He estimates that sales of jewelry made with rough diamonds amounted to a few hundred million dollars at most. Left to Right: Todd Reed Pyramid Ring Price: $20,000 Comment: A 9.19-carat rough diamond with princess-cut and rough diamonds set into the yellow-gold band. Diamond in the Rough Necklace Price: $34,000 Comment: Necklace with five rough diamonds, totaling 20.27 carats, in a pink-gold setting. DeBeers Babylon Medallion Price: $45,000 Comment: The medallion, from the Talisman Collection, is set in white gold with 12.15 carats of rough and polished diamonds. Among major diamond retailers, De Beers was an early promoter of rough diamonds. Two years ago, the company launched its Talisman collection, a line of jewelry featuring uncut diamonds, sometimes mixed with polished stones. The company says its Talisman pieces, which range in price from $400 to $700,000, are among its top sellers. The rise of a company called Diamond in the Rough reflects the growing popularity of uncut diamonds. Four years ago, the company began selling rough-diamond jewelry pieces online at prices of $500 to $1,200. But sales took off last year when the company decided to relaunch with new jewelry designs using bigger stones -- at higher prices. It showed its new collection at a jewelry trade show in Las Vegas last year, where it attracted significant attention from retailers, according to Anjanette Clisura, the company's president. Now the company's pieces, which only use diamonds of five carats or more, sell at Bergdorf Goodman and Neiman Marcus for prices starting at $5,000 and averaging about $35,000. Diamond in the Rough expects sales this year to double to $5 million. The profit-margin advantage can be substantial for jewelers. Jewelers pay about $8,000 for a high-quality one-carat polished white diamond, according to Ronnie Friedman, president of the Diamond Manufacturers and Importers Association of the U.S. Prices vary much more for rough diamonds on the wholesale market, with some selling for as little as $50 a carat and others costing several thousand dollars per carat, depending on the color and quality, experts say. Retail prices for rough diamonds also vary, but for a sense of the cost relative to cut diamonds, consider a 5-carat rough diamond set in a white-gold ring with pave diamond accents by Diamond in the Rough, which sells for $33,000. Under the industry rule of thumb, a rough diamond of that size could be expected to yield a cut diamond of half its weight -- about 2.5 carats, which in a ring would retail for an average of $40,000. A fairly high-quality, 5-carat cut diamond could cost $160,000 or more. Designers say the high price tags are justified by the uniqueness of the stones and the designs. Uncut diamonds are also often adorned with smaller polished ones for contrast and extra sparkle. Some shoppers say they're willing to pay more for jewelry that looks unusual. Penny Waller, an artist in California, says she recently spent $15,000 on three rough diamond rings from designer Todd Reed. "There is a little magic" in a stone that is "untouched, in its natural state," she says.