Beyond Beauty: What’s fuelling the soaring prices of the rarest gems

The quest for perfection

The market wants a gem that has a well-saturated colour, precise cutting, top-notch clarity, and crystal quality for the gods — an unnatural perfection from a natural creation. Valuation criteria made for diamonds are now being applied to coloured gemstones, driving consumers with limited knowledge to seek lab reports that provide the desired terminology instead of buying gems based on their visual appeal. This is driving up the price of those gems that check all the boxes, motivating lapidaries to sacrifice precious and rare gem material at the altar of priceless perfection.

Diamond disruption

A supply glut in natural diamonds because of overproduction, combined with aggressive marketing by the synthetic diamond segment, has confused the end-consumer, dampening demand for natural diamonds. This has resulted in a price drop in certain categories of natural diamonds. The visibility of that price drop in diamonds in the face of rising prices for coloured gemstones is driving consumers to shift allegiance from diamonds to coloured gems.

Sourcing

Lapidaries/gem manufacturing firms (companies that cut and polish colour gemstones) source rough stones from institutional mining companies, small-medium scale miners, professional gem dealers (rough and polished), informal diggers and dealers, and the secondary jewellery market.

Geo-political events post the pandemic, rising regulation and taxes have increased the cost of operations and logistics for miners resulting in many of the small to medium players exiting the industry. This has disrupted supply chains and shrunk the quantum of top-grade gems being brought to the open market.

Traceability requirements by jewellery firms and retailers have driven gem lapidaries to prioritise sourcing rough material (for cutting and polishing) from a handful of institutional mining companies, which are dealing with a plethora of issues such as inconsistent production, theft, increase in security and operating costs. For most gem mining operations, a small percentage of production (can range from as low as 1% to 7% depending on the mine) is usually responsible for the vast majority of their revenue. But to access that premium product, they need to mine a larger volume of commercial-grade material. Given the finite nature of gemstones, even large-scale mines are experiencing low production across all grades, reducing the probability of finding the top-tier gems. This, combined with inflation, has contributed to higher reserve prices for the premium rough gemstones being auctioned. The increasing popularity of coloured gemstones, especially rubies, emeralds, and sapphires, has increased the number of bidders at auction. Reduced supply, more competition and higher reserve prices by mining firms have more than doubled the acquisition cost of untreated top-grade rough gemstones, impacting the prices of the material after its cut and polished.

From mine to market, every link in the coloured gem supply chain is asking themselves how they will replace the rough or polished gems they are selling.

Reduction in the supply chain

Gem merchants are becoming jewellery makers, miners are establishing lapidaries, auction houses are experimenting with high-end retail and bespoke jewellery commissions. Across the board, the supply chain is shrinking. Some claim this is because of increased visibility of suppliers and prices on social media and online sales platforms; others suggest it’s a recalibration of the industry. Irrespective of the reasons behind these shifts, they are exerting pressure on profit margins and prices throughout the supply chain.

Coloured gemstones are a scarce natural resource. In the months ahead, geo-political and global economic forces will add more layers on top of the current prices because of taxes and tariffs. Will this dampen demand? Shift customer preferences? Or cause the next wave of price hikes? Time will tell, but for now, if you find a beautiful gem that speaks to you and exhibits rich colour, an inner light, and fulfils your mineral dreams, grab it while you still can.