The coloured gem market has always fired the imagination of collectors but recent trends seem to suggest a marked increase in the trajectory of emeralds, rubies and sapphires as well as diamonds. Bonhams auctioneers have a very ‘bullish’ outlook for the market over the short to medium term. Daniel Struyf, Bonhams’ International Jewellery Director, went as far to say that “the market for diamonds has always been there, but coloured diamonds and top coloured stones are becoming hot.” Bonhams have stated that coloured gem prices have risen by more than 2,200% in the past decade and in 2014 they sold a 10.49 carat fine Colombian emerald for £362,500, against a pre-sale estimate of £150k – £200k!
So what factors are causing these increases and are they sustainable in the longer term?
Certification has had a profound impact on the gem market in recent years. As buyers of loose stones and jewellery become more savvy in the internet age, they are demanding gems with greater emphasis on the value of the ‘five-C’s’ (cut, colour, clarity, carat & certification). This more discerning consumer buying pattern is driving up the value of certified high quality stones at a much faster pace, placing greater pressure on supply. Buyers are also now increasingly looking at gemstones other than diamonds for engagement rings for the first time. Jean Ghika, Head of Jewellery (Europe) at Bonhams summarised these trends with the revelation that this year she has seen “some prices per carat of coloured stones outstripping those of diamonds, and that’s a real departure!”
Celebrity endorsement and increased appetite from private investors seeking to diversify their ‘treasure asset’ portfolio to include coloured stones alongside vintage cars, fine wine, art and antiques, has underpinned price growth. This has been further encouraged by historically low interest rates in the UK, the US and the Eurozone, driving many investors to shelter some of their money in hard, tangible assets that are not index linked or correlated to uncertain exchanges. As the ‘bull-run’ of gold prices came to an end in 2012, attention turned to other hard assets that will deliver short to medium term results in a liquid market.
Source: Bloomberg 2015
Collectors in the Far East harbour a deep appreciation of coloured gemstones. Given the rise of the middle class in the emerging markets, it should come as no surprise that these burgeoning nouveau riche markets are increasingly demanding high quality gemstones and jewellery, both as fashion accessories and status symbols and as hard assets. In the developed economies 80% of adult women own at least one gemstone, in China the figure is currently 20% but rising fast! Given the scale of these markets, and the fact that in China alone there are over a million, millionaires, it is not hard to see that the future is likely to mirror the price inflation that we have experienced over the past decade.
As with all commodities, increasing demand coupled with diminishing supply will create the most profound price increases. In 2014, over 145 million carats of rough diamonds were mined globally, McKinsey & Company project that by 2030 this will have declined by more than 30%. Bloomberg have asserted that the demand for fine jewellery in China alone has risen from 50 tonnes per year in 2000 to over 150 tonnes per year in 2014 and they have projected that this will more than double again by 2030. With production at Rio Tinto’s Argyle mine in Western Australia due to come to an end by 2020, it has become clear that scarcity of supply will have an uplifting effect on the prices of all coloured stones, as collectors both compete for dwindling supplies of certain gems and search for suitable alternatives when the market dries up completely.
Argyle mine in Kimberley, Western Australia, produces the vast majority of the World’s pink diamonds Rio Tinto’s