The stone, of a "vivid pink" hue and considered near perfect, but not quite flawless, triggered brisk bidding in Christie's autumn sales of Asian and Chinese art in Hong Kong.

The price smashed the previous record, set 15 years ago in Geneva for a 19.66-carat stone that sold for $7.4 million. The pink gem's per-carat price of $2.2 million was also the highest ever paid for any diamond at auction, Christie's said.

"No stone has ever been sold for $2 million a carat, we were used to ... a million dollars a carat for colored diamonds but never 2 million," said Francois Curiel, Christie's Europe chairman. "This is an absolute record that is not going to be broken for a while I believe."

Tiffany's is an extreme example of an industry shift that started during the recent luxury boom. Like most other diamond retailers, Tiffany long bought the vast majority of its diamonds pre-cut and pre-polished from industry middlemen. But with global diamond jewelry sales soaring earlier this decade, Tiffany and others worried they would soon be fighting over dwindling supplies.

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The retailer invested in mine operators, and in 2002 it began opening cutting-and-polishing plants in Canada, Belgium, South Africa and Vietnam. In the past two years it added similar operations in China and Mauritius. The in-house unit Tiffany founded in 2002 to run these plants, Laurelton Diamonds, now employs 1,100 workers, or 14% of the company's work force. It will supply more than 50% of Tiffany's diamonds this year -- up from 40% last year and none in 2003.

Others have made similar bets. Privately held retailer Graff Diamonds International owns a majority stake in a South African diamond wholesaler and polisher with facilities from Antwerp and New York to Botswana. Suppliers have made incursions on retailers' turf. Mining giant De Beers Group operates retail stores in a joint venture with LVMH Moet Hennessy Louis Vuitton SA. Canadian miner Aber Diamond bought a controlling interest in retailer Harry Winston in 2004. Indian jewelry manufacturer Gitanjali Gems Ltd. transformed itself into a global retailer starting in 2006, buying U.S.-based Samuels and Rogers jewelry chains.

Some industry analysts see risk in running operations that span from mining and manufacturing to high-end retailing and marketing. "[They're] all totally different types of activity -- and one needs tremendous expertise, skills, infrastructure to be truly competitive" in each, says Chaim Even-Zohar, principal of Tacy Ltd., a Tel Aviv-based industry consultant.

The extent of the heist had been kept secret but police have now disclosed that the items stolen had a retail value of $65 million (£40 million). Britain's previous biggest diamond jewellery robbery is believed to be a £23 million raid, which also took place at Graff's, in 2003.

The two men, thought to be Londoners, arrived in a taxi at 4.40pm on August 6 and were only in the New Bond Street jewellers for a matter of minutes.

After being let in through the security doors both men produced handguns and threatened staff. They selected a total of 43 items and placed them into a bag before briefly seizing a woman employee hostage.

She was taken outside but released when the raiders made their getaway in a blue BMW, having fired a warning shot above their heads.

While just a quarter the size of the record-holding pink gem and not quite flawless, the stone's "vivid pink" is considered near perfect and the auction house has touted it as one of the best colored stones to appear in recent years.

"There are pink diamonds and then there are pink diamonds," said Francois Curiel, the international head of Christie's jewelry department. "It is extremely rare for a stone of such top quality to appear on the market with top notes in color, cut, clarity and carat weight. This 5-carat vivid pink gem combines the best of all criteria," Curiel added.

In the six months to June 30, net profit fell 99 percent to $3 million from $316 million in the same period last year, the company said, while total sales fell 54.2 percent to $1.71 billion, from $3.74 billion during the same period last year. De Beers, which is 45-percent owned by South African resources giant Anglo American, said the fall in sales was due to reduced purchases by core clients, as they cut inventory levels, along with a subdued demand for diamonds in the U.S. retail market.

"The industry has been severely impacted by the global economic environment being the most difficult in decades," the company said in a statement. De Beers said that it has responded to the current conditions by cutting its overall costs by more than 50 percent compared to the same period last year, reducing its global workforce by 23 percent and cutting production by 73 percent compared to the same period last year.

Overall, in what might be another sign that the economy is continuing its slow recovery, Christie's "New York Jewels" auction sold 91 percent by lot and 86 percent by volume.

Head of jewelry Rahul Kadakia said a total of $11.3 million changed hands at Christie's on Thursday, "in a room buzzing with excitement."

"Following our sales in Hong Kong and London, the auction in New York reaffirmed the strength of the jewelry market. We are delighted to end Christie's Spring Jewelry season with dominant market share of 65 percent in New York and 60 percent worldwide," he said.

According to the voluntary petition, filed on June 4 in the U.S. Bankruptcy Court of the Central District of California in Los Angeles, the company's creditors number between 50 and 99, and its estimated assets total between $10 million and $50 million.

Centerstone Diamonds, a "related" company, concurrently filed for Chapter 11, according to the petition, signed by Michael Beaudry, the company president and a second-generation master diamond cutter.

The company's total debts were not listed and it was unclear how much its secured creditors are owed. However, for the 20 creditors holding the largest unsecured claims, including members of the jewelry trade and several publishing firms, the company's debt stands above $2 million.

Lines curled around for blocks in downtown Tokyo Monday for 5,000 tiny but freebie diamonds French jeweler Mauboussin was giving away in an attention-getting drive in Japan, a nation where it's still unknown.

"A value of a diamond doesn't go down. And you never get tired of a diamond," said Noriko Suzumaru, a 39-year-old housewife, who jumped on a train from the nearby city of Kawasaki to stand in line after seeing the deal on TV news.