COMMENTARY – Most jewels fall short as investments

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By David Brough

LONDON, March 28, 2020 – Most jewels should be seen as emotional treasures rather than as investments. Investment jewels are a niche characterised by supreme rarity and exceptional beauty.

Most jewels should not be considered as investments because margins are high compared to costs of production, and the raw materials in many items sold on the high street are not rare.

Retailers urge customers to see jewellery as items of beauty, or emotional gifts, whether they are bridal or anniversary pieces or to mark Valentine’s Day or Mother’s Day

“Advising clients, predominantly in a retail capacity, I would caution against purchasing jewellery as a financial investment,” said Helen Dimmick, industry consultant and retail ambassador of the UK’s National Association of Jewellers (NAJ).

“With transparency, but without specific detail, I would outline the pricing structure of stock investments, supply and demand, overhead costs etc and the required retail mark-up that would significantly reduce the future profit potential.”

Helen added: “However, within this framework jewellery is predominantly an emotional investment. From the cost of a bouquet of flowers an alternative item of jewellery can be purchased for which the use and memories will last a lifetime.

“The key to maximising this emotional significance depends upon unlocking the potential storytelling opportunity and the relevance of each precious gemstone, metal and design for every occasion. At this point the emotional value return negates any cost implications.”

When is jewellery an investment?

Extremely rare and beautiful pieces of jewellery, featuring exquisite craftsmanship and large natural untreated gemstones, can be seen as investments.

The key to jewellery being an investment is quality, size and time, says Jason Hirsh, director of high jewellery retailer Hirsh London, located on Grafton Street, just off Bond Street.

 

Sotheby’s

 

“As with anything in life, if you buy it and want to sell it the next day, you will not see a return on your investment. If you are not in a rush and look after your piece of jewellery, in 10+ years, you will be realising your investment especially if you have followed the following guidelines,” Jason said.

“In order to purchase a piece of jewellery that will grow in monetary value, look for a piece with significantly sized gemstones as a necklace of 30 carats of 0.01-carat diamonds will never appreciate in value like a 10-carat diamond solitaire pendant. This rule works for all precious gemstones.”

Jason added: “Quality is a must as you will not realise a profit on a poor colour gemstone full of inclusions. A clear gem, however, in perfect colour will see your returns come back many times over but this must be a natural gem without treatments.

“Synthetic gemstones, beryllium and fractured filled stones will not bring a return on your investment whatsoever.”

Apart from gemstones, gold jewellery is traditionally regarded as a “safe haven”, often jumping in price during times of geopolitical turmoil: bullion prices surged to the highest level in more than seven years in March 2020 due to concerns over the coronavirus pandemic, for example.

In an increasingly uncertain world, 18-carat or 22-carat gold jewellery can be seen as a protector of wealth because of the value of the precious metal on commodity markets.

Gold jewellery can be taken to a jewellery shop and scrapped as prices of the yellow metal hit highs.

No one can be sure when a stock market bubble may burst or when the next global financial crisis will take place.

In March 2020, following a prolonged rally, stock markets entered bear territory due to fears coronavirus could drive the global economy into recession.

Rare and beautiful fine jewels can appeal as safe-haven stores of value when other assets fall, and may retain their value in real terms if inflation jumps.

Supplies of gold, silver, platinum, palladium, and gemstones such as diamonds, rubies, emeralds and sapphires, are under pressure due to finite availability and rising demand as incomes and populations grow over the long term.

As the incomes of the wealthiest people rise in leading fine jewellery markets such as the United States, China and India, the demand outlook for high jewellery will remain buoyant over the long term.

India, which has an expanding middle class comprising hundreds of millions of people, is one of the most dynamic high jewellery markets, with a culture that traditionally embraces gold jewellery.

China and India have alternated as the world’s number 1 and 2 consumers of gold, and the strong pace of economic growth of the two countries, notwithstanding coronavirus, is likely to underpin future consumption.

“Magnificent” jewellery auctions

The most visible investment arena for jewellery is the high-value auctions market.

At the leading sales of so-called “magnificent jewellery” in Geneva, Hong Kong and New York, extremely rare signed pieces have seen fiercely competitive bidding, notably for heirlooms.

Provenance – or the unique story — of a piece of jewellery can greatly enhance value.

In November 2018 a pearl pendant that had belonged to ill-fated French Queen Marie-Antoinette achieved an all-time high price for a pearl of $36 million, a huge multiple of its pre-sale estimate of $1-2 million.

 

Sotheby’s

 

The extraordinary provenance of this pearl – its ties to the last Queen of France, an Austrian Archduchess who married the future King Louis XVI and was executed by guillotine – was a key driver of the sale price.

“It is extremely difficult to calculate how much the provenance will add to the value of a piece of jewellery, and in this case much of the price achieved for the pearl pendant was due to its story relating to Marie-Antoinette,” Daniela Mascetti, Chairman Jewellery Europe of Sotheby’s, said after the sale.

Some collectors believe that the world record price of $71 million achieved by the 59.60-carat Pink Star diamond at Sotheby’s auction in Hong Kong in April 2017, was a bargain for the buyer, Chinese jeweller Chow Tai Fook.

The oval Pink Star smashed the record price for any diamond sold at auction following a brief bidding battle.

The justification for such a price was rarity and beauty.

The previous world record-holder for a diamond sold at auction was a blue diamond — the 14.62-carat Oppenheimer Blue, which fetched $57.5 million at a Christie’s auction in Geneva in May 2016.
Asian buyers have figured prominently in purchases of magnificent rare diamonds in the past few years, such as Hong Kong property tycoon Joseph Lau who bought the Blue Moon – another fabulous blue diamond — for a then world record price of $48 million in 2015.

Art Deco

In jewellery investment, high jewels from certain periods have performed better than others.

Art Deco pieces from the 1920s and 1930s, for example, have seen exceptional demand at recent auctions, as collectors are captivated by the unique designs of that era.

Another popular period is the Belle Époque, an age of optimism before the First World War.

Signed, or branded, jewels are more collectable than unbranded pieces, with certain houses much sought after, such as Cartier, Van Cleef & Arpels, and Bulgari.

Tiaras have outperformed in the auctions market, helped by Meghan Markle’s decision to wear a diamond tiara at her wedding to Prince Harry in May 2018.

Disclaimer: Any opinions expressed in this article are solely those of the author and should not be seen as investment advice.

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