The diamond that most people think of as the traditional or ideal diamond is, in truth, totally colorless. It's this absence of color that gives a diamond its great value. Even the slightest tinge of yellow or brown in a white diamond will decrease its value. The presence of color in an otherwise ideal white diamond shouldn't be confused with a fancy colored diamond, whose value is based precisely on the quality of its color.
To keep it simple, just remember that diamonds are found in three categories, White Diamonds, Fancy Natural Colored Diamonds and Color Treated Diamonds:
White Diamonds, diamonds falling within GIA's D to Z color grading scale, traditionally used for engagement rings and fine jewelry
Fancy Natural Colored Diamonds, diamonds with faint to vivid saturations of hues such as blue, yellow, or pink, frequently used for fashion jewelry
Here is the scale used to grade color in diamonds: IMAGE ADD
Diamond Color Grading
Generally speaking, when customers or jewelers speak of a diamond's color, they are referring to the presence or absence of color in white diamonds. In this case, the rule of thumb is, the whiter a diamond's color, the greater its value. However, this does not mean that lower color diamonds cannot be just as beautiful when they are cut well.
To grade 'whiteness' or colorlessness, most jewelers refer to GIA's professional color scale that begins with the highest rating of D for colorless, and travels down the alphabet to grade stones with traces of very faint or light yellowish or brownish color. Though the color scale continues all the way to Z, JD Houston does not sell any diamonds graded lower than M unless specifically requested by the client.
Diamonds graded D through F are naturally the most valuable and desirable because of their rarity. Such diamonds are a treat for the eyes of any connoisseur. However, if you are working within a budget, you can still obtain great value with diamonds graded G through I, since no color is visible to the untrained eye with these stones. And while a very, very faint hint of yellow will be apparent in diamonds graded J through M, this color can often be minimized or almost completely hidden by carefully selecting the right jewelry in which to mount your diamond. Yellow metals will hide traces of color in a colorless diamond, while white metals will enhance it. Keep in mind that, while most people strive to buy the most colorless diamond they can afford, there are many people who actually prefer the warm, sunny glow of lower-color diamonds.
Fancy Colored Diamonds
Everyone has heard talk about "The Four C's". They are significant because, for colorless diamonds, color is only one of several quality considerations that should be given equal weight in choosing the right stone. With fancy color diamonds, however, it's a whole different ball game. Here, the purity and richness of the diamond's color is the most important consideration.
Many fancy color diamonds come from Australia. They are generally smaller than other diamonds and are used primarily in fashion jewelry. Yellow is the most commonly-occurring fancy color, while red and green diamonds are extremely rare. The price of fancy colored diamonds is dependent on several factors: the particular hue, or spectral color, of the diamond (the rarer the color, the greater the cost); the richness or saturation of the color (ranging from very light to light to intense to vivid); and the purity of the color (i.e. whether the color is bright and clear, or 'muddied' by the presence of other color-causing trace elements).