SmartMoney's Holiday Gift Guide

Photo courtesy of Blue Nile, Inc.

Diamonds may seem like a let-them-eat-cake gift choice during a financial crisis. But now may be the perfect time to splurge on a little sparkle, since dealers are feeling the heat, not just from the economy but also from new online competition and the nascent market for lab-produced, or "cultured," diamonds. (Graded by the Gemological Institute, they're typically 15 percent cheaper than natural stones.) Says Ken Gassman, president of the Jewelry Industry Research Institute, "Diamond prices look better than they have in years."

As every rock hound knows, quality boils down to the "four C's": color, clarity, cut and carats. But whether you choose natural or synthetic, clear or colored, sorting out a diamond's merits can be tricky, so ask for independent grading scores from a certified assessment lab. Looking for the perfect pendant? Forget big bling, says Constance White, style director for eBay. To complement today's refined styles, she says, go for elegant and understated: "Think more Grace Kelly and less Elizabeth Taylor." Which is why our winner is the $2,500 Three-Stone Pendant from online jeweler Blue Nile. With a center stone weighing in at half a carat, the necklace doesn't skimp on sparkle, while the subtle white-gold chain and three-diamond design make it as perfect with a business suit as with a ball gown. We think Her Highness would approve.