Gems as an Asset - Part 1

Diamonds

I’m more accustomed to writing about the aesthetic value of jewelry and gemstones, but I have seldom written about their intrinsic value – as an asset. While I would always maintain that most collectors should choose primarily out of love for the design, color and feel of each piece, their future investment value shouldn’t be completely ignored. I always refer to valuable pieces as “wearable investments.” Jewelry can be worn, enjoyed, admired, and passed down to future generations to similarly enjoy and admire.   And while most investment advisors recognize the purchase of gold as a valid method for diversifying a portfolio, very few would see jewelry in the same light. Yet some jewelry can and should be considered for its investment value. This blog will concentrate on fancy colored diamonds; future installments will deal with other gemstones and jewelry as assets.

But what makes a piece of jewelry or a gemstone a valuable asset?   It is true that record setting prices have been realized when certain notable gemstones have been auctioned, most especially rare colored diamonds. Just last April, a 59.60 carat Fancy Pink diamond brought $71.2 million at Sotheby’s Hong Kong, the highest price ever for a gemstone. The winning bidder, Hong Kong retail mogul Chow Tai Fook, immediately changed its named from the Steinmetz Diamond to the Pink Star.   And while such an obviously extraordinary jewel will certainly retain and even increase in value, most of us are not in a position to purchase at that level. But there are many other aspects of a colored diamond that can make it a valuable heirloom. Let’s discuss what some of those aspects are.

Pink Star Diamond

With diamonds of any color, rarity translates to value. One of the ironies of colored diamonds is that they gain their color through impurities or defects in the stones. With white diamonds, stones of one carat or more are the most likely to retain and increase in value.  Color is even more important, as is clarity. White diamonds need to appear colorless, while the value of fancy colored diamonds depends on the intensity of their color, whether blue, pink, yellow, red, violet, brown or whatever color in the diamond spectrum. The deeper the color, the rarer the stone, and the more valuable. This can range from Fancy Light to Fancy Intense to Fancy Vivid, as defined by the Gemological Institute of America (or GIA).

But how do these stones gain their color? The cause varies with the hue. Blue diamonds occur when a bit of boron is trapped in the crystal structure as the diamond is forming. Blue diamonds, especially deep blue diamonds such as the Hope Blue, are extremely rare. In yellow diamonds, nitrogen has replaced some of the carbon, producing the yellow tint, or sometimes a brownish hue. Green diamonds are the result of natural radiation in the rocks where the diamonds form; the radiation produces defects in the structure of the stone, which trap electrons that interact with light to produce the green color.

And then there are pink diamonds, increasingly popular. Some of the highest quality I know of are Argyle Pink diamonds, from the Rio Tinto Argyle mines in Western Australia. These are becoming increasingly rare, as the yield from the mine are diminishing, and only one-tenth of one percent of the diamonds mined are pink. Again, defects in the stones produce electrons which interact with light and produce the pink hue.

Gem cutters, when carving fancy colored diamonds, will frequently choose shapes that intensify the effect of the color. For instance, yellow diamonds, if carved in the radiant pattern, can increase the effect of the color and therefore increase the value of the stone.

Size is less important for these colored diamonds; their rarity and beauty dictate their value.

Should making a purchase in the amazing world of naturally colored diamonds appeal to you, my resources and 30 plus years of experience will surely make your decision easier.