The diamond industry would like us to believe that diamonds are very rare, and thus very valuable. This is really far from the truth, since the annual production of gem-quality diamonds is over 100 million carats.

There are very rare diamonds, however. We don't mean just very large ones, which are of course extremely rare. Rather there are rare kinds of diamonds, particularly strongly colored natural diamonds in pink, blue, yellow and green. Among the colored diamonds, the rarest of all is the red diamond. In fact there are only perhaps 20 to 30 red diamonds known to exist, and most are less than half a carat.

In 1980 the highest auction price paid for a diamond was $127,000 a carat for a 7.27 ct pink diamond. That record was shattered in 1987 by the first high quality red diamond to be sold at auction, the 0.95 carat Hancock Red. It sold for for over $926,000 a carat!

The Hancock Red was sold by the heirs of the American owner, Warren Hancock, a Montana rancher and diamond collector. Mr. Hancock had bought all his diamonds at retail prices from his local jeweler, and he had reportedly paid $13,500 for the 0.95 carat red diamond in 1956. It is fair to say this was one of the greatest gemstone investments of the century.

A new price record was just set in November 2007 at Christie's in Geneva. A ring containing a rare 2.26 carat purplish-red diamond sold for $2.6 million, or about $1.15 million a carat.

The largest known red diamond that has been graded by the Gemological Institute of America (GIA) is the 5.11 carat Moussaieff Red Diamond. It is a trillion cut diamond rated as Fancy Red by the GIA. This diamond was reportedly found by a Brazilian farmer in the mid-1990's as a rough stone of about 11 carats. The diamond was purchased and cut by the William Goldberg Diamond Corp., where it went by its original name, the Red Shield. It is currently owned by Moussaieff Jewelers Ltd., though the selling price has not been revealed.

Some colored diamonds, such as blue and yellow diamonds, are colored by trace amounts of impurities. Yellow diamonds are colored by nitrogen, and blue diamonds by boron. But red and pink diamonds are not colored by impurities; rather their color is the result of minute defects in the crystal lattice.