Pricing

We as gemstone supplies are often asked the same basic question regarding pricing of items.   "Why is a 1 carat blue white internally flawless Diamond sold, for 3-4 times that of similar quality Emerald, when the Emerald is about 400 times rarer?" or "why does a good 1 carat heated sapphire sell for twice as much as a Tourmaline of ten times the size?".

Interesting questions and ones which do not always have the obvious answers we expect.  

The simple answers, one would think, would be routed in the basic economics of commerce, that is of supply and demand. If the supply of a product is limited and its popularity causes an increase in demand then the price will by necessity rise. However, if truth be told there are many other market factors at work to determine the sale price of a stones; lets just consider a few for now:

Cartels

Believed by many to be the bane of a free market economy, exerting un natural market influences on product, pricing to downright collusion and price fixing, cartels are not the most eagerly received member of any industry and ours is no different.

Consider the case of Diamond, supposedly one of the worlds most rare, and therefore most expensive gemstones.  In the mid 1800's diamond were relatively rare with the total world production being  a few kilograms a year from alluvial diggings.  Then in 1870 vast deposits were found in South Africa and world production almost overnight spiked to tons. On the diamond fields themselves rough prices plummeted as each day more and more gem quality stones were presented to the buying tables for purchase. The veritable glut  caused an oversupply in what was really a small market for this gemstone. After all a white stone was a new option for jewellery in what had been a market where colour had been held as the benchmark of desirability. With the British financiers of the South African mines in very real danger of losing their investment,  their solution was to create the De Beers cartel that to this day, through a number of iterations (CSO,  IDC) controls most worldwide diamond production and supply. Quality diamonds are actually not scarce at all, De Beers controls how much supply comes on the market at any one time, and therefore maintain and controls pricing.

In more recent times companies such as Tanzanite 1 have attempted to control (with limited success) the world price of Tanzanite. Choosing to sell its rough not onto the market directly but using a modified De Beers approach, where the initial rough is sold in sights to sight holder, who may then resell or cut for themselves. There has been limited success in this as only a portion of the main deposit of Tanzanite is under the control of Tanzanite 1, and leakage into the general market place is high.

Social Engineering

Asked today, the average buyer will give credit to the association between Diamonds and marriage, to a long held historical belief and tradition, the truth however is firmly rooted in the 20th century.

Looking at a recessive sales trend in the purchase of its fine gemstone production,  De Beers  mounted a  decades-long advertising campaign to associate diamonds with love, courtship and marriage, under the now familiar slogan "Diamonds are Forever." As they say in the trade "Romance Sells" The Diamond engagement ring, once unknown in the majority of the world (including Europe), is today considered an essential part of the ritual of marriage. The actual giving and receiving of a Diamond ring is perceived to be part and parcel of the contract of engagement, unheard of tens of years ago. This singular example is probably one of the most successful feats of social engineering in the 20th century.

Nomenclature

In the colored gemstone world, where cartel exert only limited influence on pricing, many other forces are at work to try and influence market demand and perceived value. One important factor is "nomenclature", the effective classification of gemstones into categories. The traditional Precious Gemstones,  Diamond, Emerald,  Ruby and Blue Sapphire, definitely  command a premium price in the market due to their lasting appeal, distinguished history, durability and rarity.  Even though today many of these stones are treated or enhanced in some way, the label "precious" adds a hefty premium to the price.

Traditional Pricing Factors

All pricing of coloured gemstones is an interpolation of the various factors involved in both grading and cutting. Factors which typically effect the pricing are:

Cost of Rough - This includes the initial cost of the rough, sorting, cleaning and cobbing.

Cutting - High quality cutting is labor intensive and expensive.

Market Values - Certain factors can effect the day to day pricing, for example when a new fashion trend out strips supply for a few weeks following a particularly favourable show or launch. Or when political unrest restricts supply of a certain gem or gems.

Rarity - Rarity not only in the type, color, and quality of the gemstone but also the rarity of the cut itself.

More Bang For Your Buck

So now you have a myriad of reason why the prices of gemstone are so variable. Armed with this, how do you best go about getting the most for your hard earned salary cheque? The answers lie in really what you are looking for in a gemstones.

Instead of the old descriptors, "Precious" and Semi Precious", we prefer to us terms coined recently by the ICA (International Coloured Gemological Association) and divide gems into the following categories:

Traditional Gemstones - These in coloured gemstone terms are the big three, Emerald, Ruby and Sapphire. While exceptional, 100% natural examples of these stones, in large eye clean pieces are rare and expensive; a significant saving can be achieved by purchasing enhanced stones. Enhancements can range from heating, through fracture filling  to diffusion. All are accepted enhancements, which significantly improve the appearance of the stone in terms of colour and or clarity, while at the same time offer a lower cost alternative to the untreated stones. The Traditional Gemstones represent a sound investment, there popularity is enduring, (for many thousands of years longer than Diamond), and will never disappoint, although a premium is attached to their name, so they only represent a medium "value for money" rating.

New Classics  - These are the up and comers or the rising stars of the jewellery world. We have all seen the veritable explosion in the popularity of Tanzanite in the past decade, and it still manages in many quarters to be the "it" stone. Other members of the grouping are, Aquamarine, Imperial Topaz, Tourmaline and Tsavorite. With popularity comes familiarity, and we are seeing a healthy year on year increase in the sale price of these five leaders in this group of gems. The New Classics represent a good value for money rating. Large eye clean stones in most members are not hard to find and even with prices rising this is still a group to strongly consider

Collectors Stones -  Less well-known stones, which have not, or are not heavily marketed, often have very reasonable prices in the market, these include the Beryl’s, Moonstone and Morganite, Zircon and Spinel. Beautiful and different these stone represent a very good value for money rating.

Affordable Gemstones -  nicely colored stones which have good availability and attractive prices. These include Amethyst, Blue Topaz, Citrine, Iolite, Peridot, Rhodolite, Ametrine, Kunzite, Diopsite and Andalusite.

What this means for the Buyer in the Street

So there you have it a rather long-winded explanation of pricing and the factors at work, both seen and unseen, that influence what you must pay at the counter.

In nutshell the market forces are (in no particular order), marketing, perception, fashion, availability and cartels, all exerting either a natural or unnatural effect on product pricing.

So what does this really all mean for us as buyers? Well in our  view, a snapshot of value would be as follows:

There is still a great deal of  value across the gemstone market. In the  "precious" category, it is still possible,  to buy nice blue sapphires from Madagascar, Sri Lanka and Tanzania at relatively inexpensive prices. The production of Beryllium Treatment among other treatments has made beautiful fancy coloured sapphire readily available, at value for money prices. Tanzanite and Tourmaline may be  "New Classic", but prices are still attractive and for larger stones not at exorbitant level. In the case of Tourmaline, a vast array of available colors and cuts seem to be increasing almost daily as Tourmaline gets wider distribution. Zircon with its adamantine brilliance and lustre, is hard to equal and prices are still lower than expected. Spinel, with its excellent hardness and clarity, continues to be a good buy. Then there many affordable everyday stones priced to be suit everyone’s pocket, like Garnet, Topaz, Amethyst, Citrine and Fire Opal. Finally we enter the world of Synthetic Stones, Simulants and Glass Stones. Here colour is only limited by your imagination, cost is negligible, and value for money at a premium. These are the "Fun Stones", made for cost effective, almost fun loving jewellery, that echo's the world of fashion in their "here today gone tomorrow" quality. These are the "New Black", this week, next week and who knows.............

In the end, purchasing gemstones is a very personal thing; your choice ultimately resides with what you love and will enjoy. But if you're looking for the best values, have a look at some of the lesser known gems we've mentioned above, beauty in the natural world as they say, hides in unusual places.

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