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Is it profitable to invest in precious stones?

Throughout human history, precious stones and jewelry have always been considered not only as a store of value, but also as a tool for increasing capital. This topic was dedicated conference organized in Moscow on April 28 by the Gemological Center of Moscow State University, which brought together a large number of experts from the fields of gemology, jewelry, investments and the banking industry. Each of the speakers identified the main trends in the field of investing in precious stones. According to Executive Director of the GemCenter of Moscow State University Yuri Shelementyev, rough diamonds may be of interest as an investment object. Diamonds In recent years, prices have been rising faster than diamonds. Therefore, the purchase and subsequent “aging” of stones in a safe can be considered an investment. Experts today do not recommend investing in colorless diamonds. Due to the fact that there is a Rapaport price list, dealers always have exact prices, so diamonds are a highly liquid product, but at the same time low-margin. Today they play a more important role fancy colored diamonds, as well as many categories of colored stones. The expert especially noted corundums, namely rubies and sapphires, prices for which are growing rapidly, including stones refined by heating. Other types of improvement are not attractive for investment. For example, the cost of a 20-carat heated sapphire can be $15 per carat, noted Yuri Shelementyev. At the same time, there is a category of people for whom refined sapphires will not look interesting due to the fact of their improvement. On untreated sapphire the price tag sometimes reaches from $125 to $000 per carat. When purchasing, you should pay attention to Burmese rubies and sapphires from Kashmir, which are rightfully considered the best. However, it cannot be said that absolutely all sapphires and rubies are of interest to investors. There are such stones that it is not profitable even for miners to lift the earth. Yuri Shelementyev paid special attention to untreated rubies from the Montepiez deposit in Mozambique, which are currently undervalued by the market, however, in two or three years their deposit will be exhausted and prices will go up. Also interesting for increasing capital spinel. For her, the country of origin is not extremely important; often it cannot be determined at all. This stone is practically not refined, and a certain color is also not important. Some people buy orange spinel, others lavender, and the cost per carat can reach $15. Red Burmese and blue cobalt spinels are the most expensive. Over the past 000 years, their prices have increased several times. Yuri Shelementyev told about jadeite, for which price tags increase significantly over time. In China, when talking about its value, dealers make a sharp upward gesture to describe its incredible and rapid rise. Investing in fancy colored diamonds Tatyana Olifirova, founder of Rare color diamond advisors, member of the board of directors of PO Kristall spoke about the investment attractiveness of colored diamonds. According to her, their high cost is influenced by two main factors, exceptional rarity (of the diamonds mined, only 0,001% can be classified as fancy flowers, according to the Gemological Institute of America), and the reduction of mining sites. Argyll – a deposit that supplies the market with about 90% pink diamonds, according to experts, will close in 2020. Fancy colored stones have the lowest volatility, so they have more stable prices. At the same time, they do not have a Rapaport price list like colorless diamonds, which gives investors scope for possible earnings. The quality of the color of fancy diamonds greatly influences their price tag, category stones Fancy Intense, Fancy Vivid – the most attractive for investment. Tatyana Olifirova noted that since 2000, prices for colored diamonds have increased by 280%, for blue diamonds with a rich color (Fancy Vivid Blue) – by 360%; for comparison, the speaker cited the example of housing in London, which increased by 175 over this period %. Investments in pearls Reviewed trends in the global pearl market and investments in it Ksenia Podnebesnaya, founder of the jewelry brand “House of Pearls of Ksenia Podnebesnaya”. For ideal quality golden South Sea pearls in three years the price increased by more than 100%, and for Tahiti pearls, the white group of the southern seas – by 15-20%. Nature is not capable of creating pearls in huge quantities, which is why the cost of pearls is steadily increasing. Pearls are an indicator of the state of the planet. In order to grow an ideal pearl – Hanadama (from Japanese – pearls like an ideal flower), it is necessary for a large number of factors to coincide: clean water, a certain temperature, a sufficient amount of oxygen, etc. The expert especially noted the change in demand for different types of pearls: If earlier they bought more Akoya pearls, now the leader in sales is South Sea pearls, and only then Akoya pearls and black Tahitian pearls.

Tatyana Olifirova, founder of Rare color diamond advisors, proves the attractiveness of investing in colored diamonds Ksenia Podnebesnaya, founder of the jewelry brand “House of Pearls of Ksenia Podnebesnaya,” talks about trends in the growth of pearl prices

Criteria for identifying profitable stones Mikhail PshenichnyThe company Gemlovers, noted the following important criteria for determining which stones to invest in. First of all, these should be large stones – every year there are fewer and fewer of them, rare, but not little-known. Investment attractiveness increases if large jewelry houses use this stone in their jewelry. In his opinion, will be good for investment rubies from 5 carats, tourmalines from 10 carats. If the stone is too large, then it will not be in great demand on the market, since it can no longer be used in jewelry. In addition, the demand for certain stones may be local in nature: what is popular in one region may be of little interest in another. It is necessary to take into account that there is a favorable purchase price. For example, there is no point in buying stones from a large jewelry brand. Mikhail Pshenichny highlighted particularly interesting objects for investment: namely pink and red spinels from Burma, Pakistan and Tanzania, especially the higher color categories. In addition, tourmalines showed good growth, first of all paraiba tourmalineand alexandrites.

Mikhail Pshenichny noted Paraiba tourmaline as a particularly interesting object for investment

Risks when investing Founder of the Sundaygem group of companies, Sergey Ivanov discussed the benefits and major risks of investing in exclusive and rare colored gemstones, raw gemstones, and investing in mass-sized colored gemstones. Exclusive and rare stones are a profitable investment in the long term. Working with raw gemstones is associated with high risks during the process of refining the stones, after which the cost may not only not increase, but may even decrease significantly. Also, with the current level of technology, purchasing stones both in raw and processed form is associated with a high risk of purchasing synthetics. The result of Sergey’s report was the conclusion that the most reliable type of investment in precious stones is investing in colored gemstones in mass sizes, used in the production of serial jewelry. Complexities of the loan process I discussed the difficulties of dialogue between jewelry industry enterprises and financial institutions within the framework of the lending process. Vladislav Dokuchaev, Associate Professor of the Department of “Investment and Innovation” of the Financial University under the Government of the Russian Federation, Ph.D., SER. Those who know the banking business know that there are no loan officers on the market who understand jewelry and precious stones, so such collateral is rarely profitable. In addition, there is a problem on the part of the jewelry business, which does not know the “credit” language, which creates difficulties in communication between bank employees and business representatives. Practice of multiplying funds Shared practical aspects of assessing the investment attractiveness of precious stones and jewelry Alexey Smirnov, head of the private expert organization “Center for Expertise and Assessment”. The expert gave an example of a possible investment with a budget of $100. For this money you can purchase 000 diamonds weighing 425 carats or 0,20 diamonds weighing 15 carats with average quality characteristics H/VS1,00. Small diamonds, when inserted into simple jewelry, can be sold faster, but those 2 large stones can lie for a long time without finding their buyer. At the same time, the markup on small stones is much higher than on large ones. For entrepreneurs, working with smaller stones will be much more interesting. Alexey Smirnov paid special attention to the choice of diamond characteristics, for example, during the crisis, D/IF stones (with the highest color and clarity) were sold at huge discounts: 50-60%, and diamonds with average characteristics were sold at a 20-30% discount , therefore the latter will be the most attractive for investment.

Vladislav Dokuchaev talks about the difficulties in communication between bank employees and business representatives Sergey Ivanov, founder of the Sundaygem group of companies, talks about the benefits and risks of investing in exclusive and rare gems

The role of independent gemological examination In conclusion Alexander Stolyarevich, head of the examination department of the Gemological Center of Moscow State University emphasized that independent gemological examination is an important tool for reducing risks when investing in precious stones. It is reckless to invest money without knowing what kind of stone it is, since cheaper imitations are often passed off as expensive diamonds. Moreover, at the moment, synthetic diamonds have begun to appear frequently on the market. Conventional instruments and methods do not work in this case; you need to use a deep technique to determine synthetics. It is especially difficult to conduct research when the stones are already in the product. Synthetic rubies, sapphires, and emeralds are common on the market, so an expert assessment is needed to determine the nature of the stone. An independent examination of the stone is carried out in the laboratory, which minimizes the subjectivity of the assessment. Upon acceptance of the product, it is assigned a number with which the object falls into the hands of experts. Information about the customer is recorded separately. The stone is examined not by one, but by three experts in order to determine its characteristics as objectively as possible. Alexander Stolyarevich especially noted that assessments using a magnifying glass, microscope, and tester are no longer enough today. Diagnostic issues must be approached with knowledge of a certain repeatedly proven technique. You’ve probably often heard that investing in stones is more of a story about making the right investments, but this issue is rarely considered in depth. Therefore, from the outside it may seem that the investment process itself is something similar to buying shares and then watching the numbers rise and fall. In fact, investing capital in precious stones is a long-term and, in most cases, expensive investment with its own nuances. I talk about them and all the “pitfalls”, important points and facts from the first persons involved in investments in the material.

Disclaimer

Investing in gemstones involves risk and may result in loss of funds.

Investing in precious stones – basic facts and features of the process

Investment in stones involves the procedure of investing considerable financial resources in minerals with the aim of making a profit in the future. According to the laws of economics, invested capital returns and generates income only in profitable projects, which are precious minerals. But not everything is as simple and natural as it might seem at first glance. I will give just a few points that are often hidden or simply not talked about. Interestingly, the investment process itself has not been thoroughly studied even by the owners of the largest jewelry brands! In addition, stones, especially very expensive ones, are not the most liquid commodity from an investment point of view – mainly for a person who does not have special knowledge, experience and facts about how the system works from the inside. And such people are the majority. Insiders constantly emphasize that the number of professionals who really understand investing in precious stones is a tiny percentage compared to those who want to understand this topic or think they do (the latter are the majority). Of course, there are many professional gemologists who perfectly detail the composition and properties of precious stones and can identify a specific mineral by eye, but this knowledge is extremely insufficient when considering the issue from an investment perspective. This is reflected in the lack of knowledge in the field of pricing and in trade in general. So, suppose a person wants to contact the very same guide who knows, can, and will give advice. Where and how to get there? There are very few such specialists in Russia (and, by the way, almost all of them know about each other). In addition, in the Russian Federation there is no direct access to foreign exchanges. Usually you have to deal with either smuggling or very complex and high taxation. The ideal is to contact a broker who has been investing for many years, is located not in Russia, but abroad, and has direct access to exchanges and the corresponding “kitchen”. Why is it important that the conductor (aka #broker) is not in Russia? Because from the territory of the Russian Federation it is almost impossible to get truly profitable offers for precious stones. As a rule, the transactions themselves must take place in a country where taxation facilitates this process. For example, in the cities of the USA, Antwerp, Hong Kong – where all the major stone trading centers are concentrated. Therefore, ideally, the initial transaction for the purchase of a stone and its sale should take place abroad. According to the standard scheme, this transaction itself is carried out with the participation of brokers on each side – the seller and the buyer. Another question is whether such a fundamental approach is necessary, and what goals are pursued by a person who wants to invest in precious minerals? There are also expert comments here.

Why buy gems?

In fact, one precious mineral is large financial resources, “compressed” to the utmost minimum. For the average person, investment goals are trivial. Either this is a “safety cushion for a rainy day”, or it is capital that can be quickly taken with them when, for certain reasons, they are forced to leave the country. There are also true connoisseurs, collectors with an impressive financial background, but these are, rather, not just individuals who make transactions, but skilled, knowledgeable people who, to some extent, enjoy the very process of finding an item and making transactions. For them, the financial side is not a priority; rather, they enjoy the sensations and everything that comes with it. A significant portion of investments also goes to jewelry houses, which purchase stones, design and produce jewelry for the purpose of their subsequent sale with an added “margin.” The standard scheme is when a company found a rare stone, was able to use it in a product format and sold it at a profit. And, by the way, the ability to operate with such things adds credibility to this or that jewelry house among the audience and people in the know.

What is hidden under the guise of investments in precious minerals on the Russian market?

I won’t generalize, but in most cases, what is presented on the Russian market under the guise of investments has nothing to do with the investments themselves. From the outside, everything seems transparent and understandable – the client is offered a stone that, supposedly, will cost more in six months. They say that if you invest several thousand dollars in it today, in the very near future you will not only “recoup” the invested amount, but will also receive a significant plus. In fact: · firstly, the stones offered often do not have real investment attractiveness, since three or four transactions have already taken place, and its current price includes a substantial commission + an impressive burden of taxation; · secondly, a good investment stone will not cost 100 – 200 – 300 or even half a million rubles. The best offers on the world market only start at $12 – $000 per unit. And now I’m not talking about diamonds, but about colored stones, which have significant investment attractiveness, but this is a separate topic for detail. And now about the main thing. #investing in precious stones is rather a utopia on a short horizon. After all, usually the frontier for passive investment (provided that the stone was chosen correctly and it can be sold later) is 5 – 7 years. Sometimes 3 years – it all depends on how interesting the mineral is. In Russia, when it comes to investment stones, two things are not specified: the investment period and the channels through which a person can sell this stone in order to make a profit. That is, de facto, the chain ends immediately after the purchase of the mineral. I will not say that this is a scam, but the process still has a certain tinge of frustration. If you pay attention to the history of large investment gems that are presented on the foreign market, these minerals are purchased at auctions, then disappear for 10 – 15 years and only after that they appear in the public domain. And we are talking about stones costing from $500 to 000, 10 and even 15 (!) million dollars. It’s not easy to recite such numbers, let alone the fact that they need to be embedded in a gemstone. For the average person, this world with six or more zeros is utopian, you will agree.

Investing in precious stones – what does it look like in reality?

I’ll look at the specifics. The buyer purchases a stone – good, rare, expensive, and, by the way, it is not at all necessary that it be beautiful. Yes, it may be completely ordinary, but there will be no other one like it or even similar on the market (by the way, this is a very common situation with colored stones). In the best case, the mineral is in safe storage, that is, it does not actually belong to the buyer. When the investment period comes, it will be put up for auction, with private collectors, auctions getting involved, lengthy negotiations and complex transactions taking place. And if they are successfully completed, the buyer returns the invested funds with a certain bonus (here, depending on your luck).

Myths about investing in gemstones

Myth No. 1 – Investment stones have a mass of 1 carat or more. This is not a completely true statement when it comes to white diamonds. In fact, investment white diamonds weigh from 5 carats, and they must have extremely high, rare characteristics and a certain chemical structure. The most expensive in this regard are colored fancy diamonds, but they also have their moments. For example, a yellow karatnik has a much higher investment potential than a pink or blue karatnik, respectively. Myth No. 2 – investing in diamonds has the most advantages. Rather, there are both advantages and pitfalls here (they have been written about repeatedly above). And the latter, as it turns out, are much more numerous. If you focus on the advantages, then you have to agree here – the cost of most precious stones and jewelry with them will sooner or later increase. One way or another, there are no more stones (especially good ones), and 2021 has become a significant year. Case study: For the first time in 7 years of work, I was faced with a serious shortage of precious minerals. When you want to find something really good for a client for a specific request, but it simply isn’t on the market. Just nowhere. We want to buy a good, high-quality diamond with clarity “5”, color index “3”, visual purity and brightness, but we simply don’t have it! And, please note, we did not set out to find the perfect stone. And, of course, when we talk about jewelry with precious stones (for yourself or as a gift), in which finances are invested, there is a reserve of emotional value. A family #heirloom, which will be passed down from generation to generation, is endowed with the enormous energy potential of the family – that’s one thing. But it’s completely different when a family or person who owns a certain stone/decoration has a certain weight in society and cultural significance, then the price for such a lot automatically increases.

Successful cases and advice regarding investing in precious stones

* Place bets on rare stones with special characteristics. This primarily applies to colored stones. A valuable mineral is a rare one, for example, an orange-red-yellow #diamond. Yes, when buying it, you need to pay a certain amount to the seller, who once and somewhere bought this lot himself, but after 10, 15, 20, 30, or even more years, it can be sold well, perhaps even multiplying the amount many times over initial deposit. * Diamond collections are always in price. If we are talking about white diamonds, especially calibrated ones, which are extremely difficult to find on the market. Calibrated – meaning identical. For example, if you managed to assemble a collection of ten identical “five-carat” pieces, in the future it can be sold very well. And the cost of the entire collection will be more pleasant than selling each mineral separately. * Colored stones at a special price. For example, as was the case with Paraiba tourmaline. Approximately 10 – 15 years ago it cost about 5 – 000 dollars. Today its price is from 6 dollars, and sometimes as much as 000. As you can see, this is an asset that does not require any maintenance, except perhaps a symbolic amount for a cell in a safe. Or another case – about six years ago we found a quality 1 carat green pear-shaped diamond for about $70. And so, not so long ago, a client inquired about the cost of such a “carat pear”, and its price on the market was already $000. Not a bad difference, right? Main conclusions: The process of investing in precious stones is slow, difficult, if not very complex. Its main advantage is that the stone in which funds have been invested can be sold after a certain period of time for reasonable money. Yes, this is the preservation of capital, with the right approach – an increase, but for a very long time. Buying and selling a mineral in six months, having “inflated” a third or half of the original cost on it, will not work. If you managed to purchase a truly rare stone at a good price, then you can safely sell it in 10 to 15 years. In any case, you shouldn’t look at this process solely in terms of earnings. Still, to really make money on stones, you need to become a professional in this field, and this is much more difficult than simply investing in minerals for the long term. The material does not constitute investment advice; for consultation and development of an individual investment plan, you should contact a professional.

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