The factors that determine the value of a
diamond:
color,
clarity,
cut, and
carat weight.
Color:
The most sought-after diamonds are completely colorless in natural light, with absolutely no undertones of any color. Oddly enough, this is often tested by exposing the diamond to ultraviolet light, where it should fluoresce blue. The most colorless diamonds are called D grade, with the range of increased color going on through the alphabet to Z.
Clarity:
Diamonds are rated for clarity by their appearance under a 10x (10 times magnification) jeweler's loupe. This finds flaws that cannot be seen by the naked eye. A diamond with no inclusions is graded FL for flawless; most of those available in jewelry stores are between SI2 (slightly included) to I2 (included).
Cut:
Cutting a gemstone makes an irregular pebble into a brilliant finished stone. The quality and symmetry of the cut can change a stone's value by up to 50 percent. A cut can mask flaws in the stone or make them more obvious; it can make light appear to burst out of the stone or make it look flat and dull. Certain cuts, such as the brilliant cut with at least 58 facets, will make a cut stone more valuable than something like a seventeen-facet single cut.
Carat weight:
Though people say things like "Look at the size of that rock!" about some jewelry, the weight of the stone is the least important factor in its value. A larger diamond will be worth more than a smaller one of the same quality, but a small, flawless, colorless diamond will be worth more than a large one with inclusions and a slight color. And of course, a "one carat ring" with a cluster of small diamonds will cost much less than a "one carat ring" with only one stone in it -- a lot of jewelry stores make pieces sound more impressive by giving the combined carat weight of all the stones in them.