Gemstones as investment?

[maxspinel]

I talked to a very nice gem faceter and dealer today; again, he advised me to spend a little bit more on good clarrty/unheated stones since they are good investment and tend to hold their values better. I have yet to equate gems=investment even though this is the excuse that I''ve been using on my husband so he''ll let me buy more toys. Well, but toys they remain and I still fail to realize any profits from them so far.

I am not a collector but rather a consumer who likes to wear the toys on my hands, instead of storing them in a safe deposit box. Whenever I buy anything, even though supposedly from a wholesaler, when it is time for me to take it in for a trade-up from a store that I did not originally get the stone from, I always lose at least 30% and if I want a cash value, it is even more grim. The designer mounting is worse and when the fashion is out, it is just like scrap metal. On the other hand, I''ve never sold any of my stuff; as I accumulate more and more, I am not sure whether they are junk or treasure.

I once visited an estate store looking for a sapphire and all of their stones under magnification, show some wear and tear with nicks and scratches on the surface. Some of the internal flaws are also horrible and I am not sure if they were orginally like that or it was caused by accidental blows due to daily abuse. Even diamonds, with a Mohr hardness of 10, if worn everyday without protective mount, will also nick/scratch. A IF diamond/gem is doomed to become a VS stone someday???

These items actually depreciate with everday use unless you keep them in mint condition, which means in a carefully protected box. Then, it defeats the entire purpose of being able to enjoy them.

I am not sure that a consumer can really treat gemstones as investment since there are no where to sell. Diamonds are at least better in that respect since there are some kind of grading standard. As far as colored stones, the value is more like "he said"/"she said"; it is worth a fortune when you want to buy and pennies when it is time to sell.

 

[bar01]

If you wish - everything in your life can be considered an investment. Some will have a negative appreciation and others a positive appreciation. Some will fluctuate over time.

Even cars are “an investment” - although all most all depreciate - I try to pick one and maintain it so it has the “least depreciation” compared to others.

With regards to fine gems - I did not buy them “as an investment” - but at some point I do consider the investment potential (appreciation/deprecation) factor.

I tink fine gems, in general, should appreciate over the very long haul. That is if you sell your gem 20 years from now, it should be worth more than you paid for it assuming it is in good shape, but I am not an expert in this area. Also to argue against this - who is to say what the market will "prefer" 20 years from now ?

With regards to colored gems, and specifically corundum, unheated do” hold” their value better according to the experts. This is simply a rarity factor - and that rarity will increase as more and more methods of synthetic enhancement become available.

We have discussed much about colored stone grading here on PS. At this time, if you have an independent lap appraisal using a GIA or AGL color grading system - along with data on clarity, dimensions, cut and treatment data - this will go along way towards protecting your investment. It will also allow you to make sure you did not overpay for you gem, starting you off at a lower return.

I know this all sounds unromantic, and I would never tell anyone to by gems for an investment - but once you have chosen something you want - I think it is reasonable to at least consider the possible appreciation/depreciation factor of the gem before you purchase it - not that that should stop you from buying it - but just that you are informed.

A some what related post on reselling your stuff.

And another interesting link on collecting gems for fun and profit.

 

[colorchange]

You should not consider gemstones as an investment for two reasons :
- You will rarely get the best price and if you resell tomorow it will incure a loss
- Gemstones tend to keep value while, for instance you can rent a house and it will bring revenues + keeping value.

That said it''s a good investment to me

if you don''t buy the most trendy (I mean parabaia tourmaline for instance or even pink sapphire) or gems that would severely loss value if a determined event appeared (Kasmir pacification and true exploitation for instance, failure of De Beers to keep the diamond price high because he has more and more concurence).
The best bet is that if a gem is very nice to you, worth few and usable in jewellery, it may gain value. So buy what you like it''s an investment

.

Indeed it''s rather speculation than investment, so one should not have a serious part of it''s fortune in it.

 

[Cave Keeper]

I believe it''s possible to invest in gemstones, but you have to be prepared to pay some tuition fees amounting to tens of thousands of dollars during the process of accumulating enough experience, knowledge and skills, especially if you were to participate in the pretty wild Internet auction markets and order from Internet-based stores.

Do not look down at those sellers, whether they are Americans or non-Americans. Their legal knowledge, salesmanship and photographic skills cannot be misunderestimated. And you might look for help in vain when you need them and only too late realize that what you assume were readily available, such as email addresses, contact numbers and live on-line help, suddenly slam their doors shut.

You need to invest in equipment that enable you to check your stones. You''ll have to learn how gemstones can be treated, enhanced, improved or repaired, or even simulated.

Your chances are better if you have access to the sources of production where you might be able to get in at base price levels. But if the sources are world-wide, then you can''t be everywhere. The alternative in this case is to locate yourself at the currently best site for the production of whatever gemstone you''re investing in.

Also, you should consider whether you wish to diversify your portfolio by buying different kinds of gemstones, or to specialise and concentrate on only a few kinds. You''ll have to learn how gemstones can be treated, enhanced, improved or repaired, or even simulated.

You need to consider the increasing availability of competitive substitutes, whether in the form of plastics, painted wood, bones, glass crystals or treated stones.

And be aware of the differences in prices per carat depending on the size of stones of different kinds.

I know of many rich women who lost interest in investing in jade and diamond jewellery due to the above factors mentioned. So it may be possible that on the higher quality end, the market (and demand) has become smaller, while the markets in the most popular and lowest quality end have and will increase in size.

And if you think of retailing, distributing or selling your stones eventually, be aware of the costs, such as rent, managerial, supervisory, staff salaries, wages and allowances, other overheads, and promotional, renovation, distribution and packaging costs, etc.

Think of it, also. Why should you hold on to a stone when a jewelry store is prepared to let go, and with a smile, instead of thinking like you? The jewelry store depends on turnover income, while you''re thinking of a speculative profit. Now, such speculative profits may not be realizable over a short term period of a few years to a decade. You may have to wish to hold on to your investments for at least twenty years and maybe even thirty years, if not more; perhaps, even more than half a century. Think of the likely technological and cultural changes in the meantime, plus your descendants may be the ones who need the required knowledge to handle the investment in the stones.

Alternatively, you may consider adding value to your stones by turning them into jewellery; but just imagine the millions of people who are now employed in the jewellery industry as your potential competitors.

 

[Edward Bristol]

Gems are not an investment that can be bought and quickly resold for profit. However, over the years (better decades) untreated gemstones hold up with inflation. Some varieties become fashionable and beat any investment fond, but you have to know which one.
However, gemstones are are highly concentrated and mobile valuables. In accounting terms, they actually come under "cash equivalents". This is true only in regard to a gems'' portability, but in terms of cash-flow they can better be compared with real-estate. One might sell a gem at any time if the price is low enough, but to get a profit you will have to find a buyer who wants exactly what you have.
On the other side gems have the clear advantage over real estate that they do not to need any maintenance, they can''t be confiscated by governments and you can carry them in your pocket anywhere anytime and... gems are definitely the best looking of all investments, arent'' they?

Edward Bristol
www.wildfishgems.com

 

[Cave Keeper]

Date: 9/1/2005 10:07:22 PM
Author: Edward Bristol

:
In accounting terms, they actually come under ''cash equivalents''. T
:
Edward Bristol
www.wildfishgems.com

Now from which certified accountant did you get that get portability definition?

Cash equivalents must be highly liquid assets.

 

[maxspinel]

Hmmm, I can hardly compare the gems to real estate. At least I get some use out of my house as everyone needs a roof, and the land never depreciates. Also, the worst that I lose on selling my house is market value minus 6% commision (it is now 3 or 4% anyway) minus closng cost which is equivalent to another 1%. There is a huge market for houses as long as economy looks good. There are hundreds of real estate agents knocking on your door, eager to represent you on the next deal.

As for the gem stone, you buy from a department stone, mark up is 3 - 5 times, from a jewelry district, 2 times, from a deaelr, 120% to 150%. When you try to sell, you lose at least 30% for trade in and 50% for cash out. So to do a simple math, let us say the wholesale cost is $1000, you are lucky to get it for $1500, and you sell it back next day for a cash out of $500. Wow, right off your back, you have lost $1000, which equates to 67% of the initial cost. No wonder one needs to hold on to it for decades; even though gems do appreciate over time, you need years to overcome 67% loss. On the other hand, for real estate, technically, you lose only 6% - 7%. Another advantage for real estate is leverage. When you don''t want to live in that house, rent it out and get some cash or let the renters pay for your mortage. Well, I can''t actually rent out my old jewelry (Oh, wow, there is a thought)

Gemstone is an investment only makes sense to those in the trade; they buy wholesale, keep it for several years and sell it to the public when the stone becomes hot. I still fail to see how it can work for a consumer who has no connection and the only avenue to sell is bring it back to the dealer so they can make a deep cut. Don''t get me wrong, I love gems but not the fine fine top dollar collector quality; with that kind of money, I''ll use them as down payment for another house.

 

[gemnut]

Much as I love gems and jewelry, I have to agree with almost everyone here. Unless you are a jeweler, buying wholesale with the ability to markup by 200% and resell almost immediately, then gems and jewelry are not an investment. I love my baubles and I try to buy from as close to the source as possible thereby getting better deals, but I have no daydreams of ever actually "making money" from them. Getting back my initial outlay would probably be the best I could hope for and I know it. I''ve read in Pricescope some astronomical amounts (to me) beng spent on jewelry and I''ve certainly seen the prices in the shop windows. Heck, if I can make a downpayment in a house for the price of a single ring, I''d rather buy the house! I would then proceed to rent it and have it pay itself off

Of course, being a woman, I can''t stop my heart from beating loudly when I see a beautiful bauble.

It is therefore quite possible that I mght spend the proceeds from the house I just bought in the previous paragraph to get a new nice and shiny bauble!!

 

[Edward Bristol]

OK.OK.
I have bad experience with real estate value, never paying tendants and broken roofs.
Cavekeeper, I am positiv that they do come under cash equivilants, but that is european tax law, so may be it is not correct for the US.
Every product will loose tremendously once it crosses the retail-line. Think of furniture or consumer electronics that loose 80% of their value once they are unpacked. Gems are not that bad after all...

Edward Bristol
www.wildfishgems.com

 

[Cave Keeper]

Folks, I don''t think you can sweep away the idea of gemstones being not investible so easily based on your experience and familiarity with the current market prospects and trends.

Whether or not gemstones can be investments depends a lot on the factors of relative rarity and relative demand.

When you''re looking from a Eurocentric or North American viewpoint, you must bear in mind that population seems to be getting older and not growing rapidly, unless immigration is taken into account.

But if you consider the other continents, even if their populations do not increase anymore, they are probably going to achieve a higher standard of living. At increasingly higher levels of higher income, the need for beautiful jewelry, the factor of snobbishness and the value of bragging rights will become increasingly important. If just enough people in India and China alone were to achieve standards of living equivalent to those in well-developed economies, the demand for gemstones and the relative rarity of larger (actually in terms of only a few carats, with 1 gram = 5 carats) and untreated quality stones will ensure that their prices will go up astronomically when the time comes, which is probably just around the corner.

At this moment, most Chinese do not really have any idea of what a good quality gemstone is like. With enough educational advertisements and promotions, you can bet what they''ll be looking out for. That''s when you guys, or girls, can get rid of your junk. So take heart.

 

[colorchange]

Date: 9/2/2005 11:06:09 AM
Author: Cave Keeper
Folks, I don't think you can sweep away the idea of gemstones being not investible so easily based on your experience and familiarity with the current market prospects and trends.

Whether or not gemstones can be investments depends a lot on the factors of relative rarity and relative demand.

When you're looking from a Eurocentric or North American viewpoint, you must bear in mind that population seems to be getting older and not growing rapidly, unless immigration is taken into account.

But if you consider the other continents, even if their populations do not increase anymore, they are probably going to achieve a higher standard of living. At increasingly higher levels of higher income, the need for beautiful jewelry, the factor of snobbishness and the value of bragging rights will become increasingly important. If just enough people in India and China alone were to achieve standards of living equivalent to those in well-developed economies, the demand for gemstones and the relative rarity of larger (actually in terms of only a few carats, with 1 gram = 5 carats) and untreated quality stones will ensure that their prices will go up astronomically when the time comes, which is probably just around the corner.

At this moment, most Chinese do not really have any idea of what a good quality gemstone is like. With enough educational advertisements and promotions, you can bet what they'll be looking out for. That's when you guys, or girls, can get rid of your junk. So take heart.

You just remind me of those advisers in the internet frenzy preriod...

I would like to remind you a few things :
- Rarity don't make price or I'll be very rich

and I'm not : I own some very very rare gems that worth not a lot. You need demand. That's why diamond cost more than danburite or amethyst.
- A country that has no tradition in gemstones will rarely aquire one. Chinese rich people want to do the same and have no understandin of gems, nothing says they will ever aquire some.
Their snobuiness lies in weraing brands and that should stay for long. They will not become like Japanese who really like beautifull thing before 50 years at least, you don't change a people in less than that. They may never get to love beautifull things that nobody see is beautifull (why not synthetic ?). It's a matter of culture...
- If they get to occidental use, nothing says they will value unheated more than heated or even synthetic.
- Nothing says occidental will keep on valuating unheated (in Europe we mind much less than you do in America)
- Nothing even says the future generations will value gemstones. Traditions are going away and they will be bought for pleasure rather than by need, so surrely not the same gems.
- Color tastes are not the same everywhere because colors bear significations. Do you know what blue.red/pink/green means in China to state that sapphires (I guess blue) will skyrocket ?

 

[Cave Keeper]

Date: 9/2/2005 11:46:47 AM
Author: colorchange
:
You just remind me of those advisers in the internet frenzy preriod...

I would like to remind you a few things :

- Rarity don''t make price or I''ll be very rich

and I''m not : I own some very very rare gems that worth not a lot. You need demand. That''s why diamond cost more than danburite or amethyst.

- A country that has no tradition in gemstones will rarely aquire one. Chinese rich people want to do the same and have no understandin of gems, nothing says they will ever aquire some.

Their snobuiness lies in weraing brands and that should stay for long. They will not become like Japanese who really like beautifull thing before 50 years at least, you don''t change a people in less than that. They may never get to love beautifull things that nobody see is beautifull (why not synthetic ?). It''s a matter of culture...

- If they get to occidental use, nothing says they will value unheated more than heated or even synthetic.

- Nothing says occidental will keep on valuating unheated (in Europe we mind much less than you do in America)

- Nothing even says the future generations will value gemstones. Traditions are going away and they will be bought for pleasure rather than by need, so surrely not the same gems.

- Color tastes are not the same everywhere because colors bear significations. Do you know what blue.red/pink/green means in China to state that sapphires (I guess blue) will skyrocket ?

But of course the Internet obeys the laws of supply and demand. Has the Internet disappeared? Has the price of eBay shares gone down the drain? Today William H. Gates is probably the richest man on Planet Earth. And where is IBM and GM? QED.

You have a very valid point - demand is needed. Well, that''s where advertising, education and promotion comes in. That''s in addition to the rise in income and the accompanying increasing need for luxury goods.

However, when I mentioned relative rarity, I believe I did mention relative demand also.

As for aesthetic tastes, perhaps you probably should get to know more Chinese people before you conclude the Chinese have no sense of beauty, etc. Only two months ago, a rare 13th Century Yuan dynasty blue and white porcelain was sold for a record $27.7 million plus. Although the Chinese failed to acquire that jar, they were driving the price up all the way. Just go to a Hong Kong charity ball to see how much valuable jewellery the wives of Chinese millionaires wear to such social functions and banquets (well, admittedly, I''ve never been to one or saw those wives with their jewellery on

).

It would be a mistake to observe what some Chinese who may have just achieve an adequate standard of living going for branded goods and conclude they will never improve in their tastes and values. I am very sure that given time, their tastes and values will change beyond your recognition. Do visit the shops in Shanghai. For more than a decade, month by month, the non-branded goods available have become better and better aethestic-wise. And I''m referring to cultural stuff, not the everyday stuff which is pretty evident in Walmart stores all over America.

As for colors, cultural tastes do change. For sure the Chinese will be going up the economic ladder, and also follow the Japanese and Americans in tastes, values and outlook. Your point about how Chinese look at colors is getting less and less valid. Nowadasy, Chinese brides love to get married in white bridal gowns, and therefore there''s no need to ask me how Chinese consider the color white, not to talk about blue. I happen to know of Chinese ladies who own necklaces consisting of more than 5 carat Sapphire (probably close to, if not, Cornflour Blue) cut stones, necklaces consisting of more than 5 carat White Diamonds, and necklaces consisting of more than 5 carat Burmese Rubies, probably close to, if not, Pigeon Blood Red. And there are those that own Emerald necklaces and translucent Green Jadeite bangles. What was your question about the color red and all the others all about?

 

[colorchange]

Chinese market may grow up but I do believe it will never be a place for small high quality gems, only for big gems, of low quality for the less fortunate, excellent for me most.
I don''t feel chinese will appreciate within a few decades some 1 Ct Mogok unheated ruby perfectly cut and mesuring 5.5mm round and will usually prefer a 5 or 10 Ct african glass filled.

I will add that a the gem market could colapse worldwide as a result of a change in tates and priorities.
My girlfriend don''t mind wether a gem is synthetic or natural, don''t make much of a difference between an amethyst and a sapphire of the same color (except when they are next to each other), or between a wonterfull orange topaz and a rather common spessartite. Not to say how the cares about the velvety aspect of a Kashmir sapphire...
All she is looking for is something nice that wuill match her clothes so she prefers having one low quality gem ofr each color in pendant than a very nice one in one color.

Just imagine that more girls get like that !!!

(I mean to me it''s quite luck

)

 

[valeria101]

Date: 9/1/2005 2:04:45 AM
Author:maxspinel

I talked to a very nice gem faceter and dealer today; again, he advised me to spend a little bit more on good clarrty/unheated stones since they are good investment and tend to hold their values better. I

...These items actually depreciate with everday use unless you keep them in mint condition, which means in a carefully protected box. Then, it defeats the entire purpose of being able to enjoy them.

No idea about the seller''s advice: I would more likely agree that there is hardly any better way to tell what will be in demand tomorrow other than know well what is going on today. About that, the advice to go for better (and more expensive) merchandise makes sense. If the story is about a colored stone, than clarity and treatment and especially color sound like reasonable, straight forward value factors to me if anything does.

About wear - yes, sure. No idea where the idea that gems and diamonds are indestructible comes from. They can be repolished and recut and many would not even bother much with that but just keep the age marks there. If this is a problem, than it is not an new one by all means and it is accepted. Some kinds of gemstones or jewelry materials can trully ''depreciate'' in time, but those would just be impossible to recover - I am thinking of crackled ivory, discolored topaz and kunzite, scratched cultured pearls, dehidrated opal and the like. saphire can be repolished without wasting more than a few points.

About taste... well, this is one merchandise that has always been in fashion for a few milenia. few other things (if any that are not a biological necessity) have. And if there is some fashion affecting gem prices, than those trends are short term and minor compared to the ''trend''. Unfortunately, there is vastly less literature about gemstone prices than there is about the stock market (stability may be a cause? the fact that academics are shy about the topic another...). Ruby & Sapphire (the book and the website) contain at least one historic pricing study. You may find a small amout of academic work that may not be directly relevant for investment concerns. And... I am not sure there is a trully independent source for such data anyway! Werird ? Depending on who your investment banker is, they may provide specialized advice. Some do, and such advice is somewhat less biased (if somewhat less expert too) than what auction records or the like may provide.

I have no advice, really. All I know is that precious stones make expensive (in terms of value loss or opportunity cost) but effective insurance when there is none left. What will increse value tomorrow is anyone''s guess. And if anyone knew, why would they tell? Just IMO, unlike about the stock market, it is possible to learn a few things about gemstones'' value just because their history runs long enough to make some records umbiased.

 

[Cave Keeper]

Date: 9/5/2005 6:45:55 AM
Author: colorchange
Chinese market may grow up but I do believe it will never be a place for small high quality gems, only for big gems, of low quality for the less fortunate, excellent for me most.

I don''t feel chinese will appreciate within a few decades some 1 Ct Mogok unheated ruby perfectly cut and mesuring 5.5mm round and will usually prefer a 5 or 10 Ct african glass filled.
:

Now didn''t someone, somewhere in PS CSF, said something about some Burmese claiming it wasn''t a native Burmese term and that they suspect it was the Chinese who were the ones using the term ''Pigeon Blood Red''?

Don''t you agree a rich Chinese lady would go for the livelier stone over a duller one? And, if so, then almost by definition, the the result of perfect geometry is great brilliance, wouldn''t you agree that rich Chinese lady would choose a perfectly cut stone? And, if an unheated stone gives bigger bragging rights over a heated one, wouldn''t a rich Chinese lady in competition for social status, etc., with other rich Chinese ladies will go for an unheated stone?

 

[colorchange]

I really don''t think that heated/unheated is a question of status. You may talk about this in US (I don''t know) but at leats in Europe :
- most women even those that are regular buiyers of jewellery don''t know that synthetic exist
- they are very far from thinking about treatment
- even if they would, it would be rude to ask or state anything about the size/treatment/value of what is worn

Here women wear jewels for their own pleasure, when it comes to social status, it''s a matter of clothes.
There is strictly no good argument to state that based on use, a natural is worth more than a synthetic or an unheated more than a treated.

I don''t know much chinese but some japanese and can tell you none of the women I saw would brag. It''s american culture not european or asian to brag (by words) currently it''s in the chinese culture to brag by wearing visible jewels and a 10 Ct dull ruby seems to them to be much better than a 0.5 Ct livier.

There is nothing logic in gems don''t try to argue... as far as a synthetic can''t be told from a natural by anybody at an arms length, there is no reason that it would not worth the same.

 

[valeria101]

Date: 9/5/2005 10:57:47 AM
Author: colorchange

There is nothing logic in gems don''t try to argue... as far as a synthetic can''t be told from a natural by anybody at an arms length, there is no reason that it would not worth the same.

I only have reports to reffer to, but fine jewelry seems to be as much in demand anywhere - meaning, just by a relatively small number of buyers. The lack of recognitions for high quality is present everywhere as well. Is Pricescope relevant for the entire US ''market'' ? Maybe not. If untreated status represents empowerment for bragging rights or something else, that I do not know either. For better or worse, jewelry is not only priced based on the looks at arm''s length and even when it is despite materials (remember the cost of Lalique glass jewels) that does not mean value becomes easier to explain.

It may be that the US makes up for the largest part of the demand for jewelry. What the global picture looks like and how it may affect one buyer''s decission between two stones... that is a difficult bit to get right. I would not know how to begin looking at these two as related. To me, they bear only a week relationship at best.

 

[Cave Keeper]

Date: 9/5/2005 10:57:47 AM
Author: colorchange
I really don''t think that heated/unheated is a question of status. You may talk about this in US (I don''t know) but at leats in Europe :
I don''t know much chinese
:

Oops! My mistake; I thought the point of argument revolved about the tastes of the Chinese. Oh, well. Sorry for wasting your valuable time; won''t be making the same mistake again.

One last word. When it comes to status consciousness, a woman''s six inch tongue can kill a man six foot tall.