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[Gemlab Report] Ruby and sapphire as an investment



                   June 1998 - Issue #1

                       By: Ted Themelis

In This Edition:

Ruby and sapphire as an investment

Ruby and sapphire as an investment Before any ruby or sapphire is
considered as an investment, it should be understood that there is
no secondary market in the gem and jewelry industry. It has to be
created. Gemstones are not commodity items having immediate cash
value, like stocks or bonds. The investment decisions on gems rely
heavily upon:

1 The investor’s knowledge, experience and ability to recognize
fine quality gems that hold their value at all times.

2 To appreciate the gemstone’s beauty and rarity.

3 To have cash reserves in order to pay the phenomenal prices
commonly charged.

4 To have the ability to accept loses in the future, if they
should occur.

Generally speaking, low and commercial quality rubies and sapphires
displayed in a jewelry store are not considered as investment
vehicles, no matter how convincing the advertised “sale” is
presented. Fine quality rubies and sapphires may be considered as
investment vehicles, if they are properly documented by qualified
gemological laboratories, accompanied by opinionated report from
gemstone experts determining the gem’s value at all levels (cash
value, dealer’s cost, wholesale, retail). When purchasing high
value gems, a second opinion by different gemological laboratories,
as well as additional valuation reports from different gemstone
experts are highly recommended. High quality rubies and sapphires
maintain their value internationally, and may be worn and enjoyed
over the years, while still maintaining or appreciating in value.
They are an easily transportable investment that can be traded in
almost any part of the world. Seasonal fashion trends do not affect
their value.

The international auction houses usually offer Very high quality
gems where knowledgeable, sophisticated, and wealthy gem
connoisseurs appreciate the gem’s beauty and rarity. The prices
paid in these auction houses by individuals, or jewelers/gem
dealers acting on behalf of their clients, are truly based on the
law of supply and demand, at the time of sale. These auctions
represent a limited, but important segment of the gemstone market.
Sometimes, a collector may develop a keen interest, or “fell in
love” with in a particular gem. Take for instance the magnificent
62.02 carat Burmese blue sapphire. This gem was bought three times
by the same upper-echelon New York collector/gem dealer, who paid
US$2.85 million (US$ 46,000 per carat) in St. Moritz sale in
February 1988. That was a top dollar paid for this gem at that
time. Food-for-thought: if the US$ 2.85 million paid for this gem
were deposited in the bank earning interest for little over 10
years, at this writing (May 1998), the account accumulated would be
over US$ 6.2 million. Here is the question: Is the 62.02 carat blue
sapphire worth today nearly US$ 100,000 per carat?

Successful gemstone investment scams through direct mail,
telemarketing, or via the Internet, have been operated for many
years, targeting the greed of the uneducated and misinformed
consumer. Low quality heat-treated rubies and sapphires make up the
bulk of the inventory offered for gem investment purposes. These
"investment gems" are usually accompanied by two types of

1 Certificate of authenticity from a well-known gemological
trade laboratory, stating various facts about the stone (that
has nothing to do with the value and quality) and

2 An appraisal report written by the firm or the individual
appraiser affiliated with the company offering the investment.
In reality, the appraised value of these stones is usually
inflated many times over their wholesale price, and these
stones have very low liquidation value.

In the gem investment era of the 1970’s and 1980’s, many cases of
fraud were investigated in the USA, and a few were prosecuted by
the U.S. Federal Trade Commission, FBI, U.S. Postal Service, and
various consumer agencies. It is quite difficult to prosecute these
investment scams.

Consumers beware!

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