By Daniel Nyfeler, Managing Director Gübelin Gem Lab
Beauty is in the eye of the beholder, it is said. Something might be beautiful and precious to me, but not to anyone else. Nevertheless, there is some kind of a common perception of beauty in many things, including gemstones. Being subjects of a global trade since centuries, the determination of beauty and quality follows certain established, mostly unwritten structures and rules.
In this article, I try to explain why it makes sense to transform such common perception into a quantitative system, and how it empowers the final customer, the ultimate driver of our industry.
Traditionally, the definition and communication of beauty and also rarity of gemstones has been the sovereignty of the trade. As part of the transaction, seller and buyer explain, emphasize, dispute and challenge the aspects of beauty and rarity of a particular gemstone (or, in case of rough, its potential), with the aim to agree on a price. This procedure applies almost globally, and all along the value chain of a gemstone, be it at the mine, on a local marketplace, at an international trade fair, at a retail desk, or even at the different types of auctions.
Three recent developments have the potential to change this established approach:
First, digitalisation and virtualisation in all domains of our professional and private lives, a megatrend further accelerated by the pandemic, forcing the industry to buy and sell gemstones more and more remotely.
Second, the shifting of power to consumers. Today, consumers expect to have trustworthy data and information to get orientation even on highly complex matters, and make more educated decisions.
Third, private investors looking for alternative asset categories. The continued, loose monetary policy of central banks, the rising levels of public debt and the massive amounts of liquidity erode trust into the stability of currencies, and even entire markets and economies. Investors respond by diversifying their portfolio, allocating money away from traditional assets (such as real estate, cash, shares or bonds) to alternative investment categories, including cryptocurrencies, as well as specific hard assets such as art or gemstones.
Cryptocurrencies, such as Bitcoin or Ether are digital currencies using peer-to-peer networks for blockchain-backed transaction, without any central intermediaries or control instances, such as a central bank. Invented in 2008, cryptos instil excitement among investors and free spirits, and horrify regulatory bodies and governments, who struggle to get a grip on it – which is one of the reasons that makes them so interesting for many others.
Gemstones, on the other hand, are used since the early days of mankind by many cultures all over the world to trade goods and services. Their relative rarity, small size and decorative value made them ideal vehicles to contain, transport and exchange value discreetly.
Picture credit: Sotheby’s
Cryptos, the youngest currency, and gemstones, as one of the oldest, have a commonality: both asset classes are somewhat disconnected from the influence of fiscal and political regulators, and independent from the classical banking system, hence offering a real alternative to a system that is seen by some as increasingly unsustainable and unsecure.
Another commonality of the youngest and the oldest currencies are the difficulty to gauge their value. In the case of crypto, the dynamics in their valuation can partially be explained by the short history and the high attention it attracts, fuelled by massive gains achieved by some early investors. In gemstones, the opacity of their valuation might be rooted in the diversity and complexity of the matter, and in the lack of globally agreed standards.
Which collides with the three trends mentioned above.
The realm of gemstones consists of hundreds of different species and varieties, complemented by different nuances on colours, and gemmological phenomena such as asterism, chatoyancy or colour-change. Different sizes, cutting and polishing styles add to the complexity, as well as treatments, not to mention the different sources, i.e. country of origins. On top of this, the appearance and quality of each and every gemstone, specifically coloured gemstones, is unique.
This diversity, and the resulting individuality of each gemstone undoubtedly contribute to their attractivity. But is also makes it difficult to compare them among each other. Gemstones are not exactly a commodity. Only for one gemstone species, diamonds, the quality of the gems is subjected to a globally acknowledged standard, the 4C system established by the GIA. Its universal language of quality allows for a clear communication both within the trade and towards the final customer, and facilitates a somewhat transparent pricing. All other types of gemstones lack a consistent system to describe their quality, leaving ample room for individual interpretation of what is beautiful, what is rare, and how a particular gem compares to others.
This makes the interpretation of beauty and rarity an art accessible to highly experienced professionals only. In the trade the buyer is usually sufficiently educated to verify or challenge the statements of the seller. At the retail level, however, the buyer is typically a layperson. While explaining quality and rarity of a gemstone is the exclusive sovereignty of the seller, that imbalance of knowledge possibly leaves the buyer in vagueness, triggering a desire for a neutral opinion. Since they are not involved in the transaction, gem testing labs already have a certain credibility as issuers of professional opinions on the identity, authenticity and origin of gemstones. This position of trust can be expanded to quality and rarity.
The first gem lab to venture into this domain were the American Gemological Laboratories. Since 1977, they apply their ‘Total Quality Integration Rating’, a system suggesting a grading of the main quality characteristics of gemstones, comprising colour, clarity and cutting. The different grades are then integrated in a final verbal qualifier. The Total Quality Integration Rating has reached a certain acceptance particularly in the American gemstone trade. It can be seen as a first structured and fairly comprehensive approach towards gauging quality of gemstones by a gem lab.
Meanwhile, most gem labs are foraging in the domains of quality of gemstones, applying fancy colour terms, issuing extra letters and sumptuous books for gemstones that sport certain quality traits.
At the end of 2020, the Gübelin Gem Lab launched its Gemstone Rating system, which, compared to the AGL system, is more comprehensive and simple at the same time. In addition to quality, it also includes rarity, as well as salience. Quality is further split up into subgroups, including colour, clarity and cut. Likewise, rarity is defined by the type of gemstone, possible presence or absence of treatments, the size of the gemstone, and the possible presence of certain gemmological phenomena or traits. Salience addresses the extent of exceptionality and attractiveness of a gemstone beyond the objective characteristics of the other parameters. It is best seen as the gemstone’s capability to stick out from the crowd. Overall, a total of 13 different characteristics are determined, assigned an individual weight, and condensed to a single number, the Gübelin Points, ranging from 75 to 100 points, and accompanied by a verbal descriptor for specific ranges of points.
The aim of this system is to give orientation and comparability for final customers, but also to the trade. It is designed to combine comprehensiveness of scope with radical simplicity of output. The primary target audience is the final customer, as the ultimate driver of the entire industry, and the one stage of the supply chain in most need of independent advice.
The system has its limitations and challenges. Not all factors that determine the commercial value of a gem are counted in. Origin, for example, is not in scope of the rating system (the reasons for this omission, along with many more details, can be found in the FAQ section of our rating website. Only in combination with a gem lab report, the rating can potentially be applied to derive a commercial value, at least approximately. Another limitation is the highly simplified form of the service, yielding merely a number, reflecting a mix of separate unrelated properties. A simple number cannot exhaustively express the beauty or individuality of a gem. Regional differences in taste, as well as fashions and trends, are also not reflected in the rating system.
One challenge is the changing nature of rarity, due to shifts in supply and demand. It requires a system of maintenance that considers the main, long-term changes of availability and consumer’s taste, but disregards short-lived fashion and trends.
Our initial concern about an inconsistent application of the rating did not substantiate, luckily. After one year of experience since its launch, and having rated more than 1,500 client stones, some of them multiple times, the system has proven stable and reliable, and can be applied consistently. Surprisingly, the one parameter with the highest subjectivity, salience, turned out to have an even higher consistency than certain quality criteria.
The announcement of the Gemstone Rating system has triggered many different reactions in the trade. Many welcomed the new service as ‘long-awaited’, while others rejected the idea, questioning the rationale and plausibility of such a system, and even more the eligibility and competence of a gem lab to offer the service. We acknowledge that with this service, we are penetrating deeper into a domain that so far was the exclusive sovereignty of the trade. This statement of a gemstone dealer might exemplify that side of the spectrum of reactions: “Personally, I hate the idea of you rating my gemstones, but my clients love it. Hence I give them what they want.”
The high demand of parts of the industry and even more so among final customers and private investors strengthens our conviction to continue the rating and make it part of our standard service.
Rating systems such as ours serve both the trade and the final customer. The trade gets another convenient tool facilitating transactions remotely and digitally, improving the efficiency of purchasing processes. To final customers it offers a simple aid to get orientation and direction in a complex domain. It empowers the final buyer and as such helps in popularizing coloured gems, which ultimately fuels again the trade.