The Challenges of Gemstone Pricing

Unlike stocks and bonds, gems have no market to tell you the price and no exchange to let you know how much of anything is available at any given time. For colored gemstones in particular, the market is highly illiquid, which means there’s very little price transparency.

Prices for the same or similar items can vary widely among gem dealers and independent jewelers as well as between the two. Never same one outlet’s price is correct and the other’s is wrong. Some investors overpay for gems only to make a killing on those very items several years later. Others think they’re buying at a discount, only to lose their money entirely.

The fact is, market information isn’t always baked into a gem’s price. Only those investors that do their homework can take advantage of opportunities or discrepancies in the market. Due to market inefficiency, price also doesn’t necessarily reflect gem value. Determining value may be tricky and usually takes time.

If you really know the material you’re dealing with, you’ll often know if any new sources of supply are entering the market. New gem deposits are often discovered, marketed, and then subsequently exhausted. This type…