Analysis and Opinion
Gemval interviewed major gemstone traders working online and market analysts. We were selecting the most reliable web resources dealing with online gemstone trade for a long time. We hope that their professional opinion will help customers in better understanding of what happens nowadays on the market.
Our colleagues and partners were asked to answer 3 questions:
1. How seriously the recession and finance crisis of 2008-2011 do influence the online gemstone trade in general?
2. What are your recommendations regarding loose gems and jewelry as an investment alternative?
3. Which gemstone types do you see as being undervalued most in the current market?
David Weinberg, Multicolour
The recession, the decline in real estate prices, and the euro/debt crisis have had a notable impact on the online gem and jewelry business. Because a large portion of the business depends on USA and European consumers, the downturn has been significant. For gemstones, online sellers with diversified market exposure have probably fared a little better but still there has been a problem selling mid range gemstones between $50 and $500. The high prices of gold, the diminishing middle class, and the lack of disposable income have all impacted the salability of gemstones in the mid range. High-end rare gemstones over $10.000/pc. continue to be in strong demand especially offline and in Asia while low-end stones below $20/ct. are still selling ok both online and offline for silver jewelry or for collectors. Here in Bangkok, our proximity to China and India as well as our access to local wholesale demand has helped us considerably. 2010 was the most difficult year but 2011 has to be substantially better.
Gemstone and jewelry investments should be left to experts. Dealers with experience can benefit, but care and attention to detail are critical and still there will be mistakes. Try to buy with a laser focus on the gemstones and don't be distracted by what the seller says. Fine gemstones are extremely rare commodities and for those of us that believe in them, we value them more than paper money and will always be buyers at the right price. For novices, jewelry/gemstone investments can only be successful with sufficient research and a diligent approach to selling and a willingness to wait and sell at the right time.
Right now, Ethiopian opal must be one of the most undervalued gemstones. From a historical perspective, we can compare the prices to Australian opals, which were the only important previous source of this material. The Ethiopian stones are a fraction of the price of similar Australian stones. Although the stones absorb water and become transparent when they are wet, the Wello opals seem to be relatively tough and unlikely to craze. Large sizes are the rarest so those are the one to look for. Right now, a lot of material is available but who knows how long it will last.
Marc Sarosi, Africagems
The recession has no doubt affected our industry. However people are still getting married, having engagement, anniversaries etc. I am seeing much more interest in natural unheated gems and with the focus on quality gems without problems. The people who are buying are becoming much more demanding in their gemstone needs and being much more fussy on getting the "right" gemstone. I've definitely seen as drop off in spontaneous impulse buying.
I don't push gemstones/jewelry as strictly investments. I always convey that gemstones and jewelry can be a good alternative to say an investment in gold and point out examples were a timely investment in gems (Brazilian alexandrite, Mahenge spinels, Mozambique Paraiba tourmaline) would have made a spectacular return. But the buyer must really love gemstones and their intrinsic beauty and rarity before considering it as an investment in my mind.
That is a very good question. As the world has become smaller and producers travel to sell and even have online stores in Africa, prices have escalated dramatically for traditional wholesalers. There are no bargains anymore. I still feel unheated very fine sapphires are a good buy as
production is always been sporadic and it's a staple seller. Anything unusually large and clean like huge sphenes, off color tourmalines and large tanzanites.
Laurent Sikirdji, Gemfrance
Of course when more people are losing their job or have less incoming, they do not focus to buy items like gemstones. So in the case they want to buy a gem they will be more attentive to have a very inexpensive, even in a low quality or a more expensive in the finest quality. And also less collectors are presently on the gemstone market.
Investment in loose gems can be done in stones in the finest quality, not only in precious stones but also in colored stones as spinels and tourmalines. And this investor must be first investing in beauty, being a gemstone lover.
The price of the fine spinels was increasing during the past months and years. But I think that it is only the beginning. They are not enough fine gemstones for the market. It is the same situation with large and clean tourmalines. For some kind of stones, the problem is not the price; the problem is to find the stones. We can see that, for example, with unheated rubies and sapphires, color diamonds, spinels, demantoid garnets from Ural.. Some other gemstones are also undervalued regarding some controversies about those ones, as for Andesine. But now it has been proven that the Oregon sunstone is not the only source of red feldspar of gem quality. I think that Oregon sunstone as the other red feldspars as Andesine are undervalued regarding the rarity.
Ahmed Shareek, Crescentgems
Yes, The recession has affected the online market, since the 1940's Americans are used buying things unseen, they used Catalogs and when the Internet came it was a natural change over. So most of the purchasing done on the Internet was done by Americans, the 2008 recession affected mainly US and sales did a nose dive, Gemstones is a luxury good where a person purchases them ONLY after he buys food, clothing and shelter. The only oasis was the sale of engagement rings where the male is forced to buy a diamond to pronounce his love for the female. Unfortunately most engagement rings have diamonds only and we have to promote colored stones.
Untreated stones, untreated stones, untreated stones... as we deplete our stocks of earth resources, untreated stones (especially blue sapphires) are going to be in very short supply, this is the item I am betting on will have the most investment value. I also feel selling a gemstone by a investor has to be more easier, Prices are NOT marked and a consumer person trying to sell a untreated blue sapphire to a jeweler will get a low price. Where as if you have stocks or gold, you know the market price and you sell it at that price.
Spinels, chrysoberyls, and sapphires are still undervalued, as a dealer from a producing country I go to the mines regularly. Sometimes I see miners working for hours without any luck, and many days they don't even get a handful. Its really tough, and you need a lot of luck to find gems. To see the hard work and investment them put into it and to see the return, I think the market forces of supply and demand will make the prices of colored stones go up.
Leibish Polnauer, Fancydiamonds
The fancy color trade and the world economy are office separated and heading for a complete divorce. The world economy my not flourish so fast- but people making money and want have fun. The color diamond business will prosper.
Fancy Yellow diamonds and Argyle Pinks and Chocolate brown diamonds will out perform any stock market index and will do great-as well as they did the last 20 years.
Fancy Intense yellows and Fancy Vivid yellows are greatly undervalued comparing to D-E-F color white diamond and they will close this gap during next 2 years.
Simon Ridderborg, Riddgem
With the crisis we was extremely worried at start in 2008 but for us we quickly seen that we have an increase in sales. We had our best year 2009 so far. But in other hand things have been worse lately with falling selling the year 2010 and also the beginning of this year but it seems to increase again. We feel like "small" customers have been less bit by bit last 2 years but customers of more special stones and more expensive stones are unaffected. Simultaneously we must take into consideration that we changed things in our business also, which affect selling.
People are for sure become more careful with money. In the same time when people are worried about their funds and stocks maybe a bigger interest coming to gems and diamonds as an alternative way to invest. And when I advice customers to investment in gemstones I think it is important to tell that diamonds are more easy to transfer into money quickly if necessary and that is something important to ask yourself before choose a right purchase.
Choose certified stones or arrange during purchase a cert or lab test document. Stay with classic stones such as white diamonds or best blue sapphires and so on. Also for investment purpose with higher risks maybe you should look for rare stones with limited known deposits, like Tanzanite. Always keep in mind that it is a good idea to arrange a document that clearly states the origin of the stone, for example, if the sapphire comes really from Sri Lanka. That can be a valuable document, which is very difficult to obtain afterwards if needed.
Surprisingly but I really think Tanzanite is undervalued at time being; there is a lot of very nice material in markets. White diamonds are on the opposite. With diamonds I observe an increase in price from the places I often buy from. But my customers are very unwilling to pay more than they did from earlier. And the diamond sales also have dropped for us during the period. Don't invest in diamonds then. Fancy diamonds is another thing. They are the rarest and the most exclusive stones, they always will have buyers among those who has too much money and don't care of prices.
Maybe other kinds of good purchase these days could be untreated sapphires and rubies, which also appear more and more in market. This can be good thing to have for future and as it looks they also mostly have very good prices. The difference between treated sapphires and untreated is strangely little. But with rubies the difference is very big, comparing flux rubies and untreated rubies. Anyway the prices on nice untreated ruby as I have seen give a good chance of valuable purchases.
John Bradshaw, Rarestone
I think the "recession" and/or "financial crisis" has had less influence with online gemstone trading than it has with the more traditional brick and mortar stores. The best of the best always has had a ready market and most likely always will. The percentage of top end gems and minerals is smaller in comparison to the number of buyers for those goods. The very low end also has had success during the years 2008-2011. I guess it goes to the saying, "If something is cheap enough, someone will buy it!" The most dramatic affect in sales in current times is the middle quality. Online or brick and mortar, the middle quality has taken the biggest hit as the "middle class" consumer has taken the biggest hit.
I never recommend loose gems and jewelry as an investment to the average person. Anybody "investing" has to have awareness and involvement in the industry (or at least someone that they trust implicitly) to make it profitable. The biggest downside is that if an investor wants to sell stocks, bonds, gold, etc, he can do so when he chooses but the liquidity of gems is something quite different.
There are a number of ways to answer this question. If you equate undervaluation with rarity, then almost any colored stone that is not emerald, ruby or sapphire would be undervalued. In other words, a fine demantoid may seem quite expensive but many average consumers have no concept of what a demantoid is and so the demand for such stones is lower. If demantoid was a well-known gemstone and in high demand and current supply held the same, the price would be astronomically higher.
Kirill Nikolaev, Gemval
Of course any global finance crisis directly, strongly affects jewelry and gemstone trade, as well as other luxury products industries, like fashion, art or antiques for example. It is quite natural. Moreover, I suppose that any serious decrease of jewelry market often precedes downfall of finance markets and may be considered as an indirect, secondary, even mystical indicator for finance markets. But it is just my hypothesis.
In most cases gemstones cannot be used as an investment for short or middle term. Forget about gemstones if you are looking for speculative deals or fast profit. Natural gems and jewelry is a good and reliable asset for long term investments only. In most cases investors will get an outcome no earlier than in 5 or even in 10 years. But if you buy right stones you can be sure of their future value growth. In my opinion, gems and jewelry is a good and fail-sure way to inherit your money to your children.
Large, untreated, clean crystals become rare year after year. Prices for large stones grow much faster than for ordinary pieces. For example, 10 years ago you were able to find easily on the market natural sapphires over 6 carats. Now large and clean specimens are very rare. Nowadays I consider tourmalines, chrysoberyls, fancy diamonds and zircons as undervalued gemstone types.
Navneet Agarwal, Navneet Gems
The recession changed a lot of things for online sellers and overall Gemstone and Jewellery dealers. In my opinion, it was a "tighten your screw" era for most dealers. This meant that all dealers had to change business from Mass production and mass selling to "Niche marketing" and niche selling where smaller markets, individual buyers became more important. Price point of views became more important. We saw a huge surge in individual designers who would design jewellery in their small little store, from small towns to large multi cities like New York City.
Since the recession shook the stock market, asset prices, land prices, gold prices - it meant a lot for the general public. The recent Asian market boom had a lot of smart investors turn to these developing Asian counties. One of the best investments were Gemstones, but the problem of liquidation meant that Investors could only invest in higher end gemstones (not in bulk), some of them which come from the richest Asian nations like Srilanka, Burma, Thailand and India. The best stone that we got a lot of individual investor inquiries were for Ruby, we aren't sure why this was, maybe because the prices in 2013-2014 has seen a huge increase in the prices of carat size and above loupe clean Burmese rubies. Our take on Investment in gemstones, is a big yes, but only if you are in touch with the wholesale trade and have good connections with retail stores. Now what to invest in? We here at Navneet Gems say Sapphires for long term investment. Rubies are a good short-term investment, right now Mozambique ruby is a good short term investment, but only clean quality, as the investors always suggest to buy the top quality.
The reason why we mentioned Sapphire as a long term investment is because they are clearly under valued, a 3 carat Ceylon loupe clean Royal blue sapphire would only cost you $5,000 or more, but a Ruby would cost you upto $50,000 for a unheated loupe clean pigeon blood red ruby from Burma. Apart from sapphires, we are seeing an increased demand for mid priced gemstones like Topaz, Garnet, Zircons, Spinels, Tsavorite.
Exclusively for Gemval.