A Guide to Understanding the Inner Workings of the Gem Trade

Understanding the players

To understand the gem trade, first you have to understand who the players are.  To begin, we divide the players into tiers.  All tiers described below, are considered to be reputable wholesalers. These tiers do not describe those in; the hobby, internet sales to the public, or “home Sales” community.

Tier 1, seller of rough and first generation cut materials (Gems) to the following ;

Tier 2, Buyers for cartels, corporate entities (Bulgari, Graff, Tiffany etc). Large (7 figure +) buys generally consuming a great portion of Tier 1’s holdings.
This buyer buys all available material, ofttimes selling what is not needed or wanted to return capitol (at loss / cost / small profit). Saving the best material for sale at premium (+) profit.

Tier 3, Buyers for Collectors, sells to other dealers (bulk of Tier 3’s business), and “Guild level” retail stores. This tier buys the best of quality, generally the rarest of material, sometimes too esoteric for Tier 1, but quite viable in the collector/dealer network.

Tier 3 is often the Museum supplier of choice for fine collections and exhibitions.

Tier 4-a, These are the gem dealers that, while having some fine goods to support their credibility in the “Industry”, will focus on “Commercial gems. These stones are more likely to be price point stones for manufacturers, small retailers,and will often have heated and/or enhanced gems to keep the “look” but be able to sell at lower costs. This tier will also supply “Lots” (large numbers of matched stones) for manufacturing purposes. These dealers will have offices, most likely, web presence, do shows, and generally have on-the- road sales staff.

Tier 4-b, These are the gem dealers that are singular entities (primarily) focusing on road sales and accessing special stones for retailers needing a particular piece to fulfill a client’s request. This tier will have inventory, though generally limited to smaller stones, often quite nice but not in the commercial domain. They will have industry connections to tier 3 sellers for special needs. Their value to the “Industry” is personal service and hands on experience, thus allowing trust from retailers and the tier 3 sellers and enabling this tier to be a “Bridge” for those less connected or unable to spend the research time necessary to find a particular stone.

Tier 5, Retail buyers , purchasing through dealers, shows, estate sellers (both commercial and private) and selling exclusively to the retail consumer.

The “Tier “ system has been created by J.Grahl for ease in categorizing the above entities. It simplifies the observation , but is not intended to be the definitive standard, it does, however, accurately articulate the systems in use as of this writing.

The escalating cost of a gem from Rough to Retail

In review of the above Tier system, several occurrences become obvious;

  1. the cost of a gem increases with each tier it moves through.
  2. The cost of accessing a gem grows with the actions needed to acquire the gem . For instance, buying at tier 1 involves a flight, hotel and attendant travel costs. However , these costs are distributed through a large number of gems in one isolated buying event, therefore nominalizing the overhead cost per stone.
  3. The cost for “looking” for rare gems increases as these buying events are limited to acquiring either singular stones or small groupings that relate to a particular gem deposits’ location. For instance , going to Burma, for Burmese ruby and Sapphire, then to Hong Kong etc.
  4. Marketing costs, be it Polygon (Trade only , subscription web sales site), direct sales via the internet, Gem trade shows, et all, all add to the cost of a gem.
  5. The simple act of hunting down a particular stone with defined cut, color, clarity and documentation, as a function of time, must be bourn in the ultimate sales price of a gem. The same applies to knowing the best resource, thusly avoiding the many hands between request and transaction.

The ceiling for a gem’s value will be dictated by the comparable gems of EQUAL color, clarity, size, cut, hue, and availability.

The Gem has price ceilings in 3 domains;

1. The dealer market. Here a stone must be purchased at a price allowing a mark-up to wholesale.

2. The wholesale market. Here , the stone must be marked-up to allow profit when sold to a retailer.

3. The collector (and most often , auction domain). Here the stone must be purchased/sold in a manner that will assess value based on previous sales of like material in these specific venues. These two arenas often are independent of, though influenced by, the jewelry/gem trade.

Gems and Value

This overview is based on interviews with the following people, none directly quoted, each party, seasoned with 30 to over 100 years (Kazanjian Family) of experience in buying and selling gems. These are people who are in the top 3 Tiers, primarily dealing in the Broker to Broker trade, though some , (Michael Kazanjian and Kim Hurlbut-Sarosi) have direct to the public sales as well.

Interviewed here;

  • Michael Kazanjian
  • Kim Sarosi
  • Evan Caplan
  • Rajiv Agrawal
  • A.Kalam

These represent first, second and third Tier buyers of gems.

The following questions are often asked;

Can one “Invest” in Gems?

The answer, based on the above interviews, is no.


The gem trade has many hands to take care of (read commissions) and the market is volatile for all but a few of the finest of gems.

Is there Value in Gems?

Yes. Historically, a number of Gems have been proven to hold value.

(The best resources that can be publicly accessed for this information are the auction results for Sotheby’s, Christie’s, Bonham’s and those others of quality).

Some of these are Rubies and Sapphires from Burma and Sapphires from Kashmir, Emeralds from Colombia, Natural Pearls (Salt water) Branded estate pieces containing significant gems from Van Cleef’s, Tiffany’s, Boucheron (among others).  There are many gems outside the “Precious” nomenclature that qualify equally (sometimes greater) in desirability, these would include;  Alexanderite, Cats eye Chrysoberyl, Red Spinel, Paraiba Tourmaline (Brazilian only), African ruby (old mine source) and others.

What establishes their value?

The two primary aspects of collectable gems are Rarity and size, in addition the distinctions of purity of color and hue as well as the clarity will effect the value of a gem. Another factor to consider is provenance. A Ruby from the Czar with documentation will bring more than a stone of equal characteristics, with no identifiable history.

Who establishes the authenticity of a gem?

With rare (very) exception, the Gem Trade requires a report from either The Gemological Institute of America, Gubelin Laboratories, or the American Gem society (possibly all in some circumstances). Provenance is supported by original sales receipts, photographs of the object being worn and appraisals using verifiable documentation, though other methods of vetting may also apply.

The monetizing or monetization of a gem… FAQ.

Were a Gem purchased , how long should it be held before any sense of increased value be established?

Based on the previous interviews, all those interviewed expect to see a ten year span to occur to allow for the changes in currency, general market fluctuations and the initial costs of purchase (brokerage fees, Re-sale brokerage fees cost of Gemological reports to bring the Gem current).

Are there any guarantees that a stone will stay stable or increase in value?

No, this is why research is so critical to putting money into Gems. The factors that have effected Gem growth are, Again, Rarity and Size. As the world population grows, income and knowledge grows as well. There are more people consuming Gems of all kinds, however, the supply is generally diminishing, with some stones simply not mined anymore.

Alexandrite, of size, from Russia is simply unavailable, the mines were played out a century ago, the same for tourmaline from Maine (USA) and soon the same will be said of Paraiba Tourmaline from Brazil. Some stones occur so rarely as to become collectable even before cutting . Large natural aquamarine crystals, Natural ruby in Matrix (the original stone surrounding the Ruby crystal) to name but a few.

Were a stone purchased, and held, how could it be returned to the marketplace for re-sale?

There are a number of viable options here, The stone could be sold at auction, back to a dealer or consigned to a dealer/broker for resale. All of the previously mentioned vehicles are in use today and are common to the Gem Trade. In addition there are internet sales opportunities that can work quite well for an individual seller. Use the advice of the seller you used for purchasing the stone as well. Often stones of this nature are re-purchased simply because a seller of integrity is only going to offer what they are inclined to keep for themselves .

Is it realistic to have money in gems?

Yes, if you are willing to be patient, buy the right types of gems , understand that this is not for the poorly capitalized, and as your enthusiasm and knowledge grows, look to the future, not just for resale, but collecting, possibly lending or donating to a museum or simply building a legacy for your future generations.

Jewel or Jewelry Applications for Gems… FAQ.

I just purchased this wonderful 10 ct Burma ruby. Can I have it set? Can it be worn?

The simple answer to both questions is yes.

Will it enhance the value?

With exception, probably not. There are number of different perspectives that effect this question.

As a general rule, when you have a loose stone and commission a mounting for it the labor factor to create a jewelry piece commensurate to the stone’s value will be quite high. Generally these mountings will be platinum, and the general consensus, if auction results are taken into account, is that very simple, 30’s styling (read vintage but not necessarily Art Deco), with a very high level of workmanship is an approach that will not “Diminish” the value, though probably not enhance it either. The issue is simply that the resale market might be enticed by the presentation, but it’s the stone that is being purchased.

Surprisingly, commissioning a piece from a major house (Tiffany, Van Cleef’s etc.) will not add much, if anything to the value either. This is from a ten year perspective of course, but the labor and attendant mark-up costs are difficult to overcome until you’re 30+ years out.
There are naturally exceptions, commissioning a piece that assembles a suite, a “Collection” of sorts, of stones purchased over time that match or are complimentary.
But, in general, there is little or no value added in setting a Gem of consequence.

Will it hurt the value?

This is the “it depends” answer.

Well taken care of, no, the value wont be affected and there is the additional benefit of the joy of wearing such a rare gem. The other side of the answer lies in the factor of “Wear” if a stone is bumped against another hard object, not stored in a separate bag/container or just simply “Banged around”, then small abrasions will occur on the facet junctions (the line where two facets intersect) or simply get scratched.
These things aren’t terminal, but will require re-cutting and re-polishing of the stone ( which must also be removed from the mounting) , will then have to have a new Gemological certificate done as well. The stone’s weight will be less and several mathematical components of the stones angles will have changed as well. The issue becomes more critical when the stone is near a “Prime weight” (10.0 carats for example). Then a simple re-polish could bring the stones weight below the Prime number and a 9.95 carat stone is valued somewhat less than a 10 ct+ gem.

Protection, Display and Storage of Gems… FAQ.

The foremost aspect of gem ownership is Rarity, by nature this implies that the Gem will not be readily replaced if lost, stolen or heavily damaged.

Can I insure my gem?

Yes, though the parameters for insurance will depend on your insurer, the Gem’s exposure and transportation.

If I create a “Collection” of loose (un mounted) gems are there displays available ?

Yes, there are many commercially available display methods for individual and groups of gems. There are also custom display “houses” that can provide specialty enclosures

How do I transport a significant gem or gem collection safely?

There are a number of companies that cater to this specific need, working for the Gem Trade, Museums and Collectors.
Brinks is just one of several in the US that provide such a service.

How do I store a prized collection?

Certainly Safes, Safety Deposit Boxes and hidden panels all apply. You must consult your insurance carrier for the best advice, as well as address your own security and exposure needs as well. If you are transporting an item to and from a bank, most insurance companies will want advance notification. A home security system need a thorough vetting with the insurance carrier as well.

How do I get my Gems appraised for insurance, and how often?

This gets tricky. You need a really good appraiser that doesn’t “Over appraise” the value (you’re paying a premium on each thousand insured) and yet is sufficiently valued so the stone can be replaced if lost. There is an “American Society of Appraisers” that is generally accepted by insurance carriers, some also require an Graduate Gemologist degree from the appraiser. You want to interview several people to get a read on their background and skill set. Not all appraisers are capable of working in an elevated “Collectors” arena.

As To “How Often”, Allow for a three year span for updates. If you have a good relationship with an appraiser, they will simply have to update a value and current date, rather than writing a new appraisal.  Most insurance companies notify their clients for periodic updates, HOWEVER… watch the market on your Gems as well, if there is a spike in the selling price , a simple call to your appraiser will make sure you are always current.