Congratulations on the marriage, anniversary, milestone, or occasion—the love you’ve chosen to celebrate with a diamond. And because you’re embarking on one of the safest, smartest, most significant purchases life has to offer. At a very good time, too.

But you’re also experiencing some sticker-shock right about now. Diamonds aren’t just expensive, they’re a lot more expensive than they were a year ago. Even on the price sensitive Internet, the four types of diamonds most frequently bought on-line had, by May 2008, seen price hikes of an average of 18.66 percent year to year.

And is it really safe to buy that diamond on-line? After the house and car, this may be the most expensive purchase of your life. Certainly, the Internet is a fantastic place to start house and car shopping. But to buy? Are you nuts or something?

DIAMOND PRICING: WHY YOU GET WHAT YOU PAY FOR

In a perfect world, the decision on which diamond, and where to purchase it, would be made regardless of price. Rather, it would be made much like the event your diamond is celebrating—chosen for its beauty, significance, rarity, trustworthiness. In short, because it attracted you more than the others—and below, we will discuss what it is about a certain diamond that can draw you to it like no other. This guide will help you cleave as close as possible to that principle while keeping a foot in the real world, where money is short. Its aim, in short, is to help draw you to your best diamond for your money.

It’s important first to distinguish between diamond price and diamond price hikes, for they have very different impacts on you, the end consumer.

Price. A very wise man I met on a park bench once told me: “Price is an illusion.” In August 1987, this man had sold his business, had $67,000 to spare, and a feeling that the stock market was absurdly high. Though he’d never made a trade in his life, he sold calls on the S&P and within two months was worth millions.

The high price of diamonds is attributed to two principal causes. The first, found readily at industry-related sites, relates to the diamond itself—a combination of its rarity, the difficulty in recovering it, and its clarity, color, carat weight, and cut. The second, found at sites hosting pundits with and/or critical of the trade, relates to the “business end” of the diamond and the pressures of the global economy. An increasingly globalized, demand-driven, competitive trade. The cost of marketing. Spot shortages. The simple fact that it is a trade conducted in U.S. dollars, currently worth far less than they should be. And the far less simple fact that it is a trade done largely on credit (the industry calls it “memo” or “terms”), making for a market highly prone to variable interest rates.

Suffice it to say: A diamond of quality is rarer and harder to get to than you can possibly imagine; and the industry is now so competitive, automated, and rational that price is set long before you see it. In short, a diamond’s price is what it is. Yes, it is an illusion about a piece of crystallized carbon that does not favor you, the end consumer. It is, however, one that is systematically and rationally agreed upon by the very intelligent men and women who have been plying and refining the diamond trade for six centuries.