Is it a gem of an investment? To put money in precious stones? Well, the experts are divided on this and the decision cannot be cast in stone, baffling both traders and investors alike for several years. This, despite the fact that the prices of some high-quality gemstones have shown considerable appreciation in recent times.
Take the emerald story, for instance. A particular type of emeralds, which sold for Rs 600-800 per carat about two years ago, now cost nearly Rs 2,000 per carat, showing a jump of 234%-150%, while tanzanite has seen a jump of over 40% during the past three years alone. As per market sources, top-quality gemstones have shown at least 100-200% appreciation in value terms during the past five years.
On the other hand, other asset classes like stocks, real estate and gold have also generated impressive returns. For instance, over the last five years, the Sensex has generated annualised returns of nearly 30%. Over the same duration, gold has generated returns of nearly 15% annualised and real estate, depending upon the location and the timing, has generated returns of over 30%.
Says Ashish Kapur, CEO, Invest Shoppe, wealth management and investment consultant: “If one looks only at the last three years scenario, the picture is even better. The BSE Sensex has generated returns of over 40% annualised whereas gold has generated over 16% annualised returns. If you were lucky in your timings, you could have generated returns as high as 28% from gold.”
Thus, even compared with these high-return assets, returns on gemstones don’t look too bad. Still, the majority of traders and industry experts remain unimpressed.
But before we proceed, let’s take a look at the various categories of gemstones. In fact, all stones — precious and semi-precious — are collectively referred to as gems. The various categories include precious, semi-precious, synthetic and imitation. All very high value and rare gems fall into the precious category. The regular ones are ruby, emerald, sapphire, pearl, coral, and garnet.
Semi-precious are more than 150 in number and are a speciality of every country. Some of them are quartz, iolite, tigers eye, malachite, kaynite, tanzanite, tourmaline, topaz, spinel etc. Synthetic stones have similar chemical formula and physical property as natural gems but are lab products, while imitations are fakes made from plastic or glass and often used instead of real gems. However, not each and every gemstone should be regarded as a potential form of investment, and even if some may look lucrative, they are definitely not suitable for every investor.
Says Kamal Gupta, chairman and managing director of the Delhi-based P P Jewellers Group, “Gemstones are a good buy if you are in a mood to splurge. They also carry the additional aura of mystique and are recommended for various star effects on our body. Scientifically, some of them do have a positive effect on blood circulation which gives different results. But, strictly speaking, gemstones shouldn’t be considered for investment simply because they don’t have any resale value.”
Agrees Mihir Shah, partner at the Chennai-based diamond merchants N Gopaldas & Co. “Except for really rare, unique gems and where the buyer has bought them from the right source and knows where to sell them back, they’re useless as an investment. Also, unlike a diamond, they wear out naturally if used regularly, and lose their value. So, only if you carefully preserve them, say over 100 years, they will gather antique value, but this can happen with a pair of Reebok shoes too, if they remain intact for that long time,” he says.
Hence gems are a good investment only what you have is rare and of high quality; and you also know the traders. But not the other way round. “Besides, prices increase only when the mines become extinct, or the currency varies. If new mines are found, prices crash. Also, I have never heard anyone selling one’s gem,” adds Mr Shah.
Sounds strange? “Definitely not,” emphasises Mr Gupta. “The use of gemstones,” he adds, “is largely culture-based, and in India nobody would like to use a stone if that has already been used by someone else.” Don’t even think of a resale.
Also, grading and pricing of gemstones are difficult and require considerable experience and training. “The gemstone market has very little liquidity when compared to the financial markets, commodities, or even real estate, and different dealers’ valuations may vary considerably,” says Amit Sarup, head, wealth management, Religare Securities. “For these reasons,” he adds, “buying precious stones is similar to investing in art.
Therefore, it is best to buy precious stones because you like them for their beauty and not as a form of investment.” Yet, stones are often tempting. “One safe way to buy gemstones is to buy them when they have been used in any jewellery. This enhances their value,” says Mr Gupta.
Significant returns may also be realised when an investor buys a large, uncut and coloured stone, and then sells it for a higher price. “The best stones to buy are the ones that look beautiful when you wear them and do not wear out fast like rubies and sapphires,” informs Mr Shah.
“Rubies, emeralds, blue sapphires, alexandrites and basra pearls are a good buy, but preferably they must be over five carats and more intense in colour,” informs Dharmesh Bothra, head, gemstones division, Gitanjali Group.
Sometimes the country of origin is also important. For instance, Sri Lankan sapphires, Kashmir blue sapphires, Brazilian and Columbian emeralds in their natural untreated form are considered a good buy. Ultimately, it’s the beauty of the stone that decides its value. And it is only a stone’s throw away if you have the money.
