What is useless about something that is beautiful? Many people purchase objects of beauty (just look at the art world!) which cost much more than a diamond!
If you paid $10,000 for something but could generally resell it for something like that value it wouldn't be a scam. But if you buy a $10,000 ring from a vendor and try to find a way to sell it for anything like that much, you will find you can not, and not only the usual "I can't recover the vendor guarantee and reputation premium" that you'll find if you try to sell things on Craigslist or something, but you'll find that you can't even come close.
It might be tempting to get into philosophical discussions about "what is value, really?", but that would be the wrong direction to go here. I'm happy to take value as a highly subjective judgment, because that is indeed what it is. My point here is brutally practical, and, well, exactly what I said, and no more... the problem here is literally that you will find that what you've bought can't be resold for anything like what you bought it for, and where that truth comes from doesn't much matter when you're trying to resell.
The art world is radically different. It is assumed that you are a smart consumer who is expected to defend themselves. And I'd also point out that if you spend a million dollars on something that turns out to be a really high quality forgery worth about $5K on the open market, we still call that a scam.
The diamond I have was purchased at wholesale price and custom made into a setting - it wasn't some off the shelf piece from Tiffany's. I think that where you purchase the jewelery from can also make a significant difference to its resale value.
A: Nowhere near as much, and B: That's what I was referring to with the "vendor guarantee"... the reason why your car loses its value when you drive it off the lot is obviously not that the car changes meaningfully, but that in the somewhat scammy world of used cars you will not be able to establish to anyone that your car really is brand new anymore, so you take a hit based on the fact that you do not have a reputation that says "I am $CAR Dealership XYZ and I stake my name on the fact this really is a brand new $CAR straight from the factory".
(Incidentally, to some extent, note that when people suggest that the solution is to always buy used, they often aren't taking that into account properly in their zeal to make their point. You're paying less precisely because the odds of you being scammed just went up. If you are, for instance, someone very likely to be able to detect scams, by all means, go collect your "knowledge premium" from the market and buy used. But if you are not such a person, think twice. I don't mean "never do it"... I just mean, think twice. I have family that was taken for a ride by buying used when they "couldn't afford" new... well, it turns out they couldn't afford "scammy used" either....)
Yes, that is one solution to the conundrum, buy at actual market value. In the longterm that's an unstable solution... if rings lose their signaling value entirely (see other comments), then the eventual stable solution is not to buy them at all. However, in the meantime, what the eventual stable solution 50 years from now will be isn't actionable today, so by all means buy something that impresses your friends and pocket the difference. My wife and I went a different route and bought a nice ring with two Tanzenite stones in it for, IIRC, on the order of $250 1999-dollars, and I still think it looks pretty nice. Tanzenite is a bit soft but we've had no problems, and I think it's beautiful but the jewelry community seems to think it isn't worth much. We were happy to come to arrangements with them on that matter. This is another way to hack the process, since people aren't consciously thinking all the way through this it can suffice to present a token similar to a "diamond ring" but that did not require the useless investment.
What does this have to do with an "open market price"? Most anything bought at retail price will not have the same resale value, that's just how resale markets work. They buy at wholesale and sell at retail. Pieces of jewelry and whatnot are not commodity bundles you can trade on a liquid market.
Retail art pieces aren't any different.. High dollar art trades at auctions (again, lots of liquidity), that's why they're easier to resell. But if you sink five grand into a piece from some gallery, good luck reselling it.
Maybe because the demand for rings is not for their commodity value, but for their signaling value? So buying a ring from Tiffany's is worth a lot more than buying one off craiglist? And they aren't scarce so jewelers don't need to snatch them up off the "open market", but they need to make high margins to cover the overhead of their fancy stores.
Are you looking for a cause to the "absurdly large" degree? Or just pointing it out as some mysterious conspiracy?
But there is a conspiracy to exploit people desperate enough to have to liquidate their jewelry. It's detailed in the article linked to by the OP. That conspiracy is what causes jewelry to have a resale value of maybe 20%. Compare this to 6-month old MacBooks Air (worth ~80% of their retail price) or a car you drive off the dealer's lot (worth ~80% of what you paid).
A piece of jewelry's wholesale value is determined by adding up the market value of its constituent components and then adding a workmanship premium. In an ideal world, consumers could buy and sell jewelry in the same way.
Also, the beauty of a ring doesn't solely exist in the diamond, the setting is a thing of beauty - the piece of jewelery itself.
More importantly, CZ is far less though than diamonds so they don't keep their shape under abuse nearly as well. There cheap enough you could swap out the stone every year, but just keeping the same CZ in a ring does not work over a lifetime.
If a friend of mine was showing off her engagement ring and it was refracting a little rainbow on her finger in the sun (like this http://upload.wikimedia.org/wikipedia/commons/b/bd/CZ_brilli...) I obviously wouldn't say anything, but come on. Getting a CZ engagement ring is going to lead to an awkward situation at some point.
Not true, cz has a visual 'fire'. Plus, most women can tell at a glance.