Are Gems Good Investments?

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Well, in the opinion of this gemcutter/Graduate Gemologist, there are two correct answers to this question:

  1. No. If you think you can buy any gemstone today and sell it in a year or five years or ten years and make a profit on it, you are probably going to lose money. If you do not have sufficient savings and more normal investments, speculating in gemstones or other collectibles is not for you. The gem market poses several major problems for the small investor/speculator. First, when you buy a stone, it can be difficult to know exactly what you are buying, as there are many clever gem substitutes and enhancements, many of which are difficult to detect, even for experts. Grading and pricing of gemstones are also difficult and require considerable experience and training. Then, when you try to sell a stone, it is often very difficult to find a buyer. The gemstone market is highly illiquid when compared to the financial markets, commodities, or even real estate. When everyone is looking to buy low and sell high, the spread between bid and ask prices is usually very high. Jewelers often sell stones for 2-3 (or more!) times their cost, but they are unlikely to buy stones from the general public for more than half their normal wholesale cost (i.e., they may buy a stone at a regular wholesale cost of $100, sell it at retail for $200-300, but only buy it back from an individual for $50). If you can find a retail buyer, they will be very unwilling to pay a normal retail price and will want to pay wholesale prices. Clearly, buying at retail prices and selling at wholesale prices is not going to make you any money.
  2. Maybe. If you can buy stones at true wholesale values (if you can eliminate as many middlemen as possible), if you can be assured of getting what you pay for, if you are careful in picking high quality stones, if you are patient, if you can find ready buyers willing to pay somewhat more than wholesale but less than retail prices, if you are lucky, if you have a lot of knowledge about the stones and the marketplace, then you might make a handsome profit. If you are able to buy rough stones and cut them yourself, your chances are considerably improved. If you can deal in some volume rather than an occasional stone here and there, your chances are also improved.

If you do have more traditional investments, enjoy gemstones, and want to buy gemstones on a speculative basis, here are a few guidelines:

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