Larion Kantor: Investing in jewelry: is it worth it?

Jewelry is part of the KFLII (Knight Frank Luxury Investment Index), a price index of the 10 most important asset classes, such as art, classic cars, coins, colored diamonds, furniture, handbags and others. According to Knight Frank, they can be very profitable investments over the long term.

But in order to understand what kind of jewelry qualifies as investment jewelry, you need to understand its pricing.

What does the price consist of?

The main share of the cost of the jewelry piece is taken by a precious stone. Therefore, it is worth paying a special attention to its choice.

The following kinds of stones are considered to be the investment ones:

Colorless diamonds from 3-5 carats with color characteristics from D to H (completely colorless to nearly colorless) and clarity from IF to VS2 (from perfectly transparent to containing minor inclusions that are visible only under 10x magnification).

Colored diamonds from 0.7 carat pink and blue in "Fancy Pink", "Fancy Intense Pink", "Fancy Intense Blue" and "Fancy Vivid Blue" shades.

Colored gemstones from 2 carats: emeralds from the Muzo deposit in Colombia, Kashmir sapphires and rubies from Burma.

All of these gemstones must be of a very high clarity and a very good or excellent cut.

The value of a gemstone is not only determined by its aesthetic qualities, but also by its rarity. For example, diamonds with fancy colors are many times rarer than colorless ones. The Gemological Institute of America estimates that for every 10,000 carats of diamonds, only one will have a fancy color. Moreover, the brighter and richer the shade, the rarer it is found in nature.

Moreover, the reserves of gemstones in the Earth's crust are finite, and the known deposits are gradually depleting. Thus, the largest deposit of pink diamonds, the Argyle mine in Western Australia, was fully depleted in 2020. This could not but affect the price, which is already growing every year. According to the Fancy Color Research Foundation, over the past 15 years price indices for colored diamonds weighing from 1 to 10 carats have risen 1.5 to 2 times.

Colored gems have seen even stronger growth, especially in the past two years. Prices for Burmese rubies in "Pigeon's Blood" color increased more than twice since 2020, while emeralds in "Vivid Green" color increased four times.

The second part of the cost of a jewelry piece is the precious metals.

The price of gold is also steadily going up lately. Over the past 20 years, the price of this metal has increased sixfold, from $300 to $1,800 per ounce. And experts predict a further growth.

The third component of the price is the marketing part. Jewelry made by such famous brands as Graff Diamonds, Bvlgari, Cartier, Van Cleef & Arpels will be many times more expensive than jewelry pieces of the same production cost, but made by a less well-known brand or a private jeweler.

However, the price does not always determine a profitable investment. The same well-known jewelry houses have mass-produced and exclusive lines of goods. It is items produced in a single copy or a limited edition, will be popular among collectors and will give the opportunity to sell them profitably. So in 2021 at Christie's auction the Van Cleef & Arpels brooch went under the hammer for 4,170,000 Swiss francs, ten times its estimated value. Mass jewelry, even if it was made by Cartier or Tiffany, would only interest pawn shops which would be willing to buy it for the price of scrap gold.

Also the age and history of a particular piece of jewelry greatly affects its price. Family jewels of famous families or royal dynasties go under the hammer for fabulous sums. For example, in 2018, a Marie Antoinette brooch was sold at auction at Sotheby's for 43.1 million Swiss francs.

Tips for choosing jewelry

If you are considering jewelry as an investment, look first of all for the precious stone. It will be the main criterion which will affect the value of your piece when it is sold. Look for stones with investment parameters and be sure to look for a lab certificate. The most reputable organization for certifying diamonds is the GIA, and for colored gemstones, the Gübelin Gem Lab.

Choose exclusive jewelry that may be of artistic or historical value. It may be time to take a fresh look at heirloom jewelry or start looking beyond jewelry stores to antique shops.

Create custom pieces. Little-known firms or private jewelers charge much less than the well-known jewelry houses, while the quality of their work may be no inferior or even superior to that of popular brands.

And most importantly, do not forget that the main purpose of the jewelry is to adorn its owners, not to gather dust in boxes. Choose something that will make you happy, wear it with pleasure, pass it on to your children and grandchildren. And let the investment value become a pleasant bonus for you, and not your main goal.