From Economist.com
THAT nervy investors pile into gold is well known: the price of the yellow metal breached $1,900 an ounce again this week. But growing numbers are also venturing farther afield, into gemstones such as rubies, sapphires and emeralds. Although coloured stones are a hotch-potch of an asset class, anecdotal evidence points to surging values.
Dealers say prices for high-quality rubies are up by 50% this year and have doubled in the past two years. Top-notch sapphires that in 2009 would have fetched $65,000-80,000 per carat (a unit of mass equal to 200 milligrams) now change hands for $150,000 or more, says Joe Menzie, a former head of the International Coloured Gemstone Association. In a recent auction to wholesalers, African emeralds sold for 63% more per carat than higher-quality stones fetched last December. Even stones of average quality are up by 20-25% this year, says one dealer. The boom has also boosted semi-precious stones, such as rubellite and red spinel, worn by those who can’t quite stretch to a ruby. “Some semi-precious stones are now priced as if they were precious,” says Guy Clutterbuck of CGM, which sells to retailers.
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There are several forces driving the price rises. The strongest is surging demand from faster-growing economies, particularly China and India. Both countries have a long-standing passion for coloured stones, some of which are seen as bringing good luck (yellow sapphires in Hinduism, for instance). Their new rich flaunt them as status symbols at dinner parties in Shanghai and Mumbai. One American dealer reports difficulty getting hold of tanzanite, a blue semi-precious stone. He can sell it for $300 per carat and will thus pay up to $280, but cannot compete with Chinese wholesalers willing to pay $350 so they can sell to domestic clients for $400. A contributing factor is the rise of the yuan against the dollar, the denominating currency for gemstone prices.
A second force is economic insecurity. Like gold, gemstones are seen by some as a tangible store of value in turbulent times. Dealers are increasingly being asked to put together collections for wealthy Americans who want to diversify away from paper investments. “Wall Street types are reading the auction results and picking up the phone,” says Edward Boehm of RareSource, which buys stones from mines.
A third factor is supply shortages. Unlike the artificial constraints imposed on diamond supply by big sellers, gemstone shortages are real. Good-quality coloured stones are hard to find in the ground at the best of times. The outfits digging for them tend to be tiny compared with the diamond giants: one of the biggest emerald miners, Gemfields, has a market value of just $66m (though it is growing smartly). “It is much more a business of mavericks” than diamonds is, says Mr Clutterbuck. Local politics have contributed to shortages. In 2008 America banned imports of gemstones from junta-ruled Myanmar, a major source of rubies. Madagascar has sapphire deposits but its politics are dysfunctional and its infrastructure poor.
Read more: http://www.economist.com/node/21528623
An intelligent Investor diversifies his portfolio by put money in stocks, bonds, gold, real estate, or cash. He shuffles in and out of these assets from time to time. Some may venture into new asset classes such as wines, diamonds, arts, antiques, a new start up business, or other high risk investments. It's no wonder one may venture into invest in gem quality colored gemstones. A savvy investor may invest in natural & rare gemstones in large carat sizes. As these gemstones have well acceptance in the international auction houses. Same as stocks, bonds, real estate, or gold, their prices are reflected from supply and demand mechanisms.
Investing in colored gemstones may be perceived as a high risk investment for some old school of thought, as colored gemstones is not wildly traded as stocks in stock market. Gem quality natural colored gemstones increase in price as time pass however a savvy investor must do some works before starting to buy gemstones.
For example, he must do some research for which gemstone to invest, find some reliable and trustworthy dealers, and most important is request a third party or an international accredited lab certification when buying a gemstone.
Gemstones investment may be a new idea for a western investor. People in India, China, and Asian perceive gemstones as personal adornment and investment. In some countries that face inflation risk, holding good quality gemstones may put the owner in better position than holding paper money. In disturbing or falling apart countries, quality gemstones can buy a way to escape to a third country.
For a savvy & well preserved wealth investor, investing in gem quality colored gemstones not only increases his purchasing power in the future, have inherited jewelry for his family but also have an admiration from his wife for an extraordinary piece of jewelry.
