Coloured Gemstones as Investment Product

How the Treasures of the Earth can Help Investors to Grow and Diversify

Overview

Coloured gemstones have been and remain intriguing, rare and durable products of mother earth. Especially their rarity and beauty have led them to be artefacts with which the rich and powerful during all epochs have adorned themselves, and we are familiar with engagement rings of top celebrities that feature rubies or sapphires instead of white diamonds.

It is not useful though to pitch coloured gemstones against their ‘white cousins’, i.e. white (or colourless) diamonds. Both occupy a niche for the investor, and while coloured gems such as rubies, alexandrites and top level sapphires can match the carat price of top white diamonds, it has to be stated that as an investment product, coloured gems are even more special than diamonds, simply as buying and selling them with a profit can be even more tricky. More on this later.

In any case, what makes rubies, emeralds, sapphires and a few others which we will mention further below potentially highly attractive as an investment product is their exclusivity, specifically for top quality stones. We have been told for decades by a well lubricated marketing machine that was originally set up by DeBeers that diamonds are extremely rare. Well, of course, they are rarer than let’s say quartz or a number of other gems. Also, they inhibit unique features such as their hardness, their lustre, their high degree of light reflection when watching and turning them (scintillation and brilliance) – they are in fact very beautiful stones. But are they really that rare? It needs to be stated that there is a number of highly mechanized large scale mining operations going on in Southern Africa (South Africa, Namibia, Angola, Botswana), as well as in Russia and Siberia, where multi-billion dollar corporations dig out the stones with extreme capital investment and know-how. While the refined diamond markets can control output in a way that prices remain stable and are even raising over the years as a general trend, rarity is not really the predominant feature of diamonds. Even though, to be fair, when we talk about investment level diamonds, i.e. colourless gems with high clarity grades, they do become much more exclusive than their more tainted counterparts.

But this story is remarkably different for the high-priced coloured gems. With a very few exceptions, there is no mechanized large scale mine for rubies, emeralds, sapphires or spinel. There is no organized trading and marketing organization on a global scale. To the contrary, the global gemstone markets are characterized by myriads of small and smallest enterprises, from mining to trading to sales. And while the demand of coloured gems has been steadily on the rise over the last decades, their output has not kept pace. As a consequence, we have seen remarkable rise of prices for the finest coloured gems over the last decades, with prices raising at around 100% between 2008 and 2018. With demand sharply increasing in China (where consumption of jewellery doubled between 2009 and 2014) India and Southeast Asia, and with supplies also increasing (although lagging behind demand due to the erratic unstructured way that products are marketed), the coloured gem market could grow by five times, from $2 billion to $10 billion in the coming decade.

From 2006 to 2013, price increases of rubies and sapphires out-paced diamonds. Marketers noted the rising interest in colored stones, and prices have been rising rapidly.

And this is what makes these stones a potentially highly interesting investment product. One should take a base of at least ten, better 15 or twenty years as horizon, that is clear. But if time is not so much an issue, one could realize fantastic gains for ones stones. What is needed though is patience, and either solid knowledge or good advice when it comes to buying and selling. But if one has some enthusiasm for one of nature’s most beautiful gifts and can meet what we just gave as condition, investment in and profiting of coloured gemstones is surely one of the most fascinating areas in the investment world.

Below we will provide some key facts about the most prominent gems which have great potential to increase substantially in prices over the next five to twenty years. A word of caution though: In the investment world, no one (or so we have heard) knows the future, and no one knows future tastes and habits. I have a bitcoin millionaire among my close friends. Even he himself would not have even thought about this possibility a few years back. So, in essence, our assumptions in this article are based on careful review about changes in gemstone markets over the last twenty years or so, and about what we think are realistic assumptions about future developments. But of course maybe consumers totally shift their preferences, and no one will ever care for a beautiful 3 carat ruby any more, and their prices fall to that of an ordinary piece of quartz. Ok, this is a gross exaggeration, looking at the last thousands of years. But the point is this: If you decide to become an active investor in this field, do your own due diligence, talk to people, watch what’s happening. Good – enough of that. Lets talk about the most prolific coloured gemstones for investors.

II. The Three Classic Grand-Seigneurs: Rubies, Sapphires and Emeralds

1)    Rubies

Rubies belong to the corund group, and corund actually is all but rare. Really. Let’s destroy all romanticism and look at the mineral: it is a form of aluminium oxide, and it is in fact very common, and used for abrasive surfaces (very intriguing and sexy). So what is all the fuzz about rubies? It is the fact that standard corund is enriched by tiny ions of chromium. This element is very rare, and even more so that it goes together with aluminium to form this intriguing pigeon blood red of colours that always made rubies the true stars of most royal crowns, gowns and swords. It is impossible to notice this stone. As a consequence, a 1gram gem (1 gram equals 5 carat) is about equal in value to 6 or 7 kilogram of gold!

1,02 carat ruby from Burma; pigeon blood red

In terms of origin, rubies are often thought to be equivalent to Burmese rubies (Burma now being Myanmar). The historically most famous rubies mostly stem from the mines of this beautiful Southeast Asian country (even though one of the most famous rubies is in reality a red spinel – more about this below). Pigeon blood red rubies from Myanmar still get premium prices in gemstone markets. It is often the case in the coloured gemstone world that certain places are mystified as origin for particular stones, and will result in premium prices, even though the world moves on and for many of those mythical origins there is new destinations that often feature better colours, stronger saturation or other characteristics that match their counterparts of the mythical origin. This is also true for Burmese rubies, which are available but increasingly rare. Top quality and highly priced rubies today are also being produced in Mozambique, Thailand, Madagascar and Tanzania. Vietnam is another top quality producer.

If one talks about rubies, one also needs to talk about treatment: The majority of rubies is being heat-treated for better / more intensive colour as well as a reduction of inclusions. Heat treatment is mimicking a natural process (remember that gemstones by and large are the result of minerals that form under pressure and heat), and for this reason heat-treated rubies are still natural gemstones (as opposed to synthetics or manufactured stones). And, if being used for jewellery, the result of heat treatment is actually quite convincing, yielding intense but not artificially colours. However, if you go for rubies as an investment product, you should look for untreated stones, as these receive substantial price mark-ups and also have received a more significant price hike over the last two years. You might then possess stones that feature more inclusions than the average heated rubies but for many enthusiasts, inclusions are simply a stamp given out by mother nature that shows the gem is real and which can also provide hints as to the origin of the gem.

Nevertheless, also for untreated stones colour is a key factor for value determination. The most highly priced rubies feature pure, vibrant red to slightly purplish red colour (pigeon blood), while orange and purple secondary hues reduce the value somewhat. In terms of tone (darkness), the colouring should be balanced, neither too dark nor too light.  Mind that if the colour is too light, the stone may be considered to be a pink sapphire – which commands lower pricing.

The other important factor as far as investment considerations are concerned is the size. It matters for gemstones, and it does so disproportionally. That means that a 2 carat (ct) gem on average is not a 1ct gem times two in terms of value, but could well be times 2,5, or 3 or even by a factor of 4. The reason of course is rarity, again. While top gem quality material is rare in general, larger stones are even rarer. If you really want a top gem investment product, look out for 3ct and above for rubies. These will not be easy to find, and they will be expensive, but their prices, especially if their colour is also top, will most likely go on rising substantially over the next years.

2) Sapphires

Sapphires are closely related to rubies as they belong to the same corund family. However, only dark red or purplish red corund are called rubies, while corund in any other colour variation is called a sapphire. There are also reddish sapphires, but their colouring will be distinctively different from that of rubies, namely less intense, leaning more towards pinkish hues. The reason is that the colouring agent, chromium, is considerably less present in reddish/pinkish sapphires than in dark red rubies (by a factor of ten). And it is other mineral impurities that will result in other colours in sapphires, such as iron that will ‘make’ a sapphire blue. And blue is still considered the most classic of all sapphire colours, especially the famed Cashmere blue. Think of a Jaguar E-Type in classic British Racing Green. However, similar as what we said about Burmese rubies, this is also true for Cashmere sapphires. A deep intense blue is still often associated with Cashmere as point of origin, but this region is almost considered exhausted as far as sapphire supplies are concerned. Fine quality sapphire today mostly originates from Brazil, Madagascar, Nigeria, Myanmar and Cambodia. However, in case you still find a true Cashmere sapphire in top colour – keep it. It will most likely continue to grow in price, and you might already be able to charge astronomical prices. The good thing is that the origin can be proved due to very specific inclusions and colour banding visible under the microscope.  A top colour 4ct sapphire of proven Cashmere origin and very good clarity might sell for around USD 150,000 – 200,000 on retail. 

Determining the relationship between colour and price is not so straight forward with sapphires as is the case with rubies. True, as we claimed above, the intense cornflower-blue is the most classic hue. And indeed, if there is no other colour denominator used, but a gem is just called ‘sapphire’, then it is usually blue. All other hues transpond their colour into the overall name of the sapphire, i.e. pink sapphire, green sapphire etc. A kind of exception is the so called Padparadsha sapphire, with an intense yellow/orange tone. It is often considered the second most valuable after the Cashmere/intense cornfield blue, but sometimes intense pink is considered more valuable than the Padparadsha. Again, it will also depend on a specific market. A pink sapphire might raise a higher price in let’s say Japan than in France, to give just one example. In any case, saturation also matters for top level sapphires. The colour should be expressed vividly, and not contain greyish tones (as one often finds in blue sapphires).

Besides the family origin, sapphires share another commonality with its ruby cousin. Here too, the rate of heat-treated stones is high. What we said about treatment and pricing also holds true for this corund family: No treatment = higher price.   

3) Emeralds

Lets talk about the third member of the famous three, the gem that occupies the green colour field. Emeralds are part of the rather prominent beryl family, which comes in a number of distinct stones: the light-blue aquamarine, the reddish morganite, the yello heliodor. There is also green beryl which is not emerald, since emeralds are only emeralds if their green colouring derives from chromium, and if it is strong and saturated. A very light green berly would thus not be considered an emerald, but a green beryl. 

And while green is not uncommon in the gemstone world, the intensity and just the harmony that the typical emerald green displays is hard to match. As an additional feature, emeralds can also be of top quality even though their interior is not eye clean. In other words, inclusion are often prominent in even high quality emeralds. Called ‘jardin’, these white or silvery bands of colour are witness to the forces under which emeralds were created. And while a heavily included aquamarine would be severely downgraded in terms of price, this is not so with emerald, which counts as a so-called ‘type III’, gemstone (together with red tourmaline and water melon tourmaline) where even at top clarity levels inclusions are noticeable under a loupe. The picture below shows the typical ‘jardin’ inclusions very nicely:

Excellent colour and and a beautiful jardin pattern are featured on this emerald

In terms of price increase and price developments, emeralds have suffered somewhat not from a declining demand. Rather the opposite is true, and emeralds count among the most popular among the expensive gems. But output has increased as well, and a number of mines in Zambia and Colombia are probably amongst the most capital intensive and mechanized mining operations in the gemstone world, next to some of Australia’s opal mines. Hence, supply is much less erratic than is the case with most other gemstone types, despite the fact that good quality emerald is far from being ubiquitous. Still, top quality emeralds raise good prices in international markets. Emeralds from Colombia tend to receive a mark-up rate. Indeed, Colombian emeralds feature a striking intense green, but whether for instance Afghan or Brazilian emeralds have to be classified below that in terms of overall quality is a big question.  

III. Secret Stars of the Trade and ‘Blue Chips’

Previously, one could (and unfortunately one still can) often hear the term ‘semi-precious’ stones, allegedly describing a group of gemstones which do not fall into the prime category of rubies, emeralds and sapphires. While generally speaking those three can raise the highest prices, this is true only at a general level. Maybe this is also a good time to speak briefly about why we face this separation between rubies, sapphires, emeralds and diamonds on the one hand, and this group of ‘other gems’. Before mankind dived deep and deeper into the subject of gemmology, covering and including scientific areas of optics, crystallography, the nature and characteristics of atoms etc (as all of these determine in their branch some or more habits of gemstones), gems were largely identified by what was identifiable back then, i.e. colour. And there we generally have colourless gems (diamonds), red gems (rubies), blue gems (sapphires) and green gems (emeralds). And while indeed some of the earliest mined gems we know of fall under these types, we today know as well that many red gems which in reality might have been for instance red tourmalines or green garnet were termed ‘rubies’ or ‘emeralds’ respectively. Example? The Black Prince and the Timur rubies of the English Crown jewels in fact are….red spinel.   

Consider this example: A 1 – 2 ct, heat-treated ruby with good colour (so not top quality, but still good, and, as we said, treated), can get you between USD 3,000 and 7,000 per carat. But a top colour slightly purplish red spinel could reach the same price levels. A fine demantoid (the green variety of garnet) could get you into the same price ranges, but even, for very fine individual stones, twice this level has been reached. And there are lesser known gems, such as the imperial topaz, Paraiba tourmaline or alexandrite for instance that can reach up to USD 40,000 per carat, and are hence in the top range together with top quality ruby and white diamonds. We can hence see that distinguishing between precious and semi-precious gemstones is hugely misleading. In this section we want to take a look at a few gems that either already reach magnificent prices per carat (as we just explained), but also at a few where we believe they can achieve substantial increases in prices over the next ten years or so. This group might be of special interest to gem investments enthusiasts with a speculative verve, as some can be bought, as of now, at fairly moderate prices, but could well be some of the top gainers of the future.

The ‘Secret Ivy League’: Alexandrite and Paraiba Tourmaline

1)     Alexandrite

This is a highly-priced, but rarely seen exotic representative of the gem world. Consequentially, it tends to be lesser known in the general public, but not so in Russia. For this country, the alexandrite is a kind of national gem, being named after Czar Alexander II, on whose birthday (so the saying goes) it was first discovered in the Ural range. What makes this gem, a representative of the Chrysoberyll family so special is not only his relationship to Russia’s royal family, but even more the fact that it is, in a way, ‘an emerald during the day, and a ruby at night’. While a number of gems do change their colour under different sources of light, no one does it so intensively as alexandrite. One might actually be led to think one carries a different stone on a ring, when glancing at it during the night. The two hues are significantly different, both displaying clear green and red colours. Rarity is the final element that lends so much value to well-cut alexandrites with easily identifiable colour change phenomena. Such a gem counts among the rarest, and can fetch astronomical prices. If you are then lucky enough to find a top quality and colour alexandrite above one carat – keep it. Madagascar and India do produce some amounts of good quality alexandrites, but supply is extremely erratic, and unlikely to increase over the next years. Top quality and top colour stones can fetch USD 70,000 per carat for a one carat plus gem and prices will most likely increase over the next ten, fifteen years.

2)     Paraiba Tourmaline

Tourmaline share some characteristics with topaz, in that they are popular, cover an even broader colour range, and can be find in most gem markets on a broad quality- and hence price scale, and, as consequence, are amongst the most popular and well-known representatives of coloured gemstones. In fact we talk of the tourmaline group, as they cover various varieties and species. Gemmologists distinguish between the blue coloured indigolith, the red rubellit, the brownish drawit, and the green verdelith. But despite all of this (or because of this), most of them will not make a good investment decision. The one very notable exception is the Paraiba Tourmaline, which we will discuss below:

The remarkable thing about this tourmaline variety is that it is all but very traditional: Only in 1988 these exceptionally bright coloured tourmalines were discovered in the Brazilian state of Paraíba. In fact it was long not entirely clear whether it was a new variety or a new species, but finally it was determined that Paraibas were elbaite tourmalines with a distinct and intense colouring (i.e. it was a variety of elbaite). The new stone made friends quickly on the international scene due to its exceptional colour scheme, and soon after the original discovery, similar tourmalines were found in Brazil’s Rio Grande Do Norte state, but were also termed “paraíba tourmaline.” Later again, similar coloured elbaites were found in Nigeria and subsequently in Mozambique. From the beginning, the trade labelled these Paraíba tourmalines. The colour in this exceptional variety stems from copper impurities.

Paraiba from Mozambique

For paraibas, it is all about colour: top values are going to blue/green colours with strong saturation. In other words, the green next to the blue is a must. Pure blues are worth only about half. But in any case, paraibas are rare, and size above 1ct is even rarer. Keep the top quality, the value will raise, as these are much sought after. Prices of Paraiba have increased substantially and regularly over the last 10 years. A top quality , 5ct Paraiba from Brazil can fetch you values between USD 200,000 and 300,000 for the whole stone, so is certainly a member of the top league as far as prices are concerned.

Also of interest might be top quality red tourmalines, i.e. rubellites. The name reminds us of ruby, and so does its colour. This variety of the tourmaline group has also steadily risen in price over many years now and also most likely will continue to do so. It is a good alternative for coloured gem investors who seek to spend a little bit less on their investment than would need to be the case for paraibas.  It has to be mentioned that Paraibas of African origin tend to be lower priced. This is one of the inexplicable mysteries of the gem markets, as from a pure chemical point of view, there is basically no remarkable difference between Brazilian and African Paraibas. But then gems are more than just their chemical structure (and luckily so). Take note however that you may reach only 50% or less for your African Paraibas. 

In February of 2006, the International Gemstone Industry Laboratory Conference determined by the way that the term “paraíba tourmaline” was adapted as a variety name, regardless of geographic origin.

For paraibas, it is all about colour: top values are going to blue/green colours with strong saturation. In other words, the green next to the blue is a must. Pure blues are worth only about half. But in any case, paraibas are rare, and size above 1ct is even rarer. Keep the top quality, the value will raise, as these are much sought after. Prices of Paraiba have increased substantially and regularly over the last 10 years. A top quality , 5ct Paraiba from Brazil can fetch you values between USD 200,000 and 300,000 for the whole stone, so is certainly a member of the top league as far as prices are concerned.

Also of interest might be top quality red tourmalines, i.e. rubellites. The name reminds us of ruby, and so does its colour. This variety of the tourmaline group has also steadily risen in price over many years now and also most likely will continue to do so. It is a good alternative for coloured gem investors who seek to spend a little bit less on their investment than would need to be the case for paraibas.  It has to be mentioned that Paraibas of African origin tend to be lower priced. This is one of the inexplicable mysteries of the gem markets, as from a pure chemical point of view, there is basically no remarkable difference between Brazilian and African Paraibas. But then gems are more than just their chemical structure (and luckily so). Take note however that you may reach only 50% or less for your African Paraibas. 

In February of 2006, the International Gemstone Industry Laboratory Conference determined by the way that the term “paraíba tourmaline” was adapted as a variety name, regardless of geographic origin.

The Blue Chips

The gems that were described in previous sections are those that can fetch tremendous prices in international gem markets. They sale as expensive as top white diamonds, or even above. They are rare, beautiful, and…have the price tag that many investors are interested at. But to conclude this brief, I would like to draw the notion on a few gems that, in terms of sales price are substantially below the two groups just discussed. However, these are stones that are of top jewellery quality, are rare or even very rare, and that are considered undervalued and have experienced significant price increases over the last years, and are expected by many to do so for the foreseeable future. In other words, these gems could bring you the biggest gains into your portfolio in the mid-future.

Blue Zircon from Ratanakiri – Ratanakiri Zircon

Zircon is the oldest mineral found on earth so far, with some crystals found in Australia estimated to be over 4.4 billion years old! Zircon from the Ratanakiri region in Northeastern Cambodia is a rare blue gemstone, with a fantastic play of colours, and almost diamond-like lustre and scintillation (fire) which continues to make it one of the most desirable gemstones. It could well be that this beauty from Southeast Asia will soon take the place of the popular aquamarine.

This Ratanakiri Zircon plugged into a gold ring shows how suitable this blue gem is for fine pieces of jewellry

Prices are increasing since many years, but good quality gems are increasingly rare. As Yasukazu Suwa, a famed gemstone expert, once wrote: ‘If a fancy Blue Diamond showed this colour, it might exceed US$80,000 for a 1 carat stone’. The price tag for a Ratanakiri Zircon is well below that, but given its fantastic optical properties and rarity, it could be highly interesting for gem investors.

Tanzanite

Another rare blue stone. But not just any blue. I bet you, if you place a blue diamond, a blue sapphire and a tanzanite next to each other and ask random people about which colour they like best, the Tanzanite would come out first. Ok, I don’t have any proof for this assumption, but Tanzanite is one of those gems that receive second and third glances also by people who are not too much into gemstones.

It is a very intense, slightly purplish blue that has no comparison. So it does feature a unique colour, which not too many gems can ascertain for themselves. This was also one of the reasons this stone was sold and marketed through Tiffany & Co soon after it arrived at the international scene in the early 1970s. So while the beauty issue even here remains in the eyes of the beholder, rarity can be measured, and quite easy so in the case of Tanzanite. There is just one mere sole operation near the town of Kilimanjaro (actually close to the local airport) where this stone is mined. And while supplies are not certain, most experts in the field estimate the yields to sink drastically within the next ten to fifteen years, and operations to stop in the next thirty! This means that after around 10-15 years, owners of good quality Tanzanites should see their prices hike and hike for the next decades. One of the prettiest gems will be the first where production will have stopped forever. An interesting experiment, and a worthwhile endeavour for gem investors for sure.

Red Spinell

Finally, a few words on a gem which is surely undervalued – even it is one of the most prominent gems at all. This is because as we wrote in the introduction until around 200 years ago, all reasonably clear, transparent and saturated red gems were labelled as ‘rubies’.

A ruby? A red spinell? It is…the latter one, but the close proximity between the two is obvious

A red spinell in fact easily matches its far more expensive counterpart in terms of colours. It can be very intensive, but its clarity is much more pronounced than the frequently included ruby. These properties, i.e. intense saturated reds, clean interiors, easy to cut, made red spinell a favourite for the jewels of the rich and powerful, those of the English Crown Jewells included. While top quality Red Spinell is far from cheap, its value is still considered very modest by most observers of the scene, and many predict him a period of strong price increases.     

DISCLAIMER

The reporting offered here does not constitute a recommendation to buy or sell any of the products discussed. It is neither explicitly nor implicitly to be understood as investment advice or assurance of any price developments. The author excludes any liability in this respect. The report is intended solely as a reader’s guide and does not at any time constitute a request for action. No contractual and/or advisory relationship whatsoever arises between the author and the readers of the report, as the report is intended solely to explain certain circumstances within the gemstone sector and does not refer to any investment decision. There are no plans to update the figures. This report may under no circumstances be interpreted as personal or general advice. Users who make investment decisions or carry out transactions on the basis of the information provided here act entirely at their own risk. The information sent by the author or otherwise related information therefore does not constitute any liability obligation.

Readers are encouraged to conduct their own research and checks and/or seek professional advice if they are interested.

Any modification, use or reproduction of this publication without the prior written consent of Parzifal Gems and Precious Metal Trading is prohibited.

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