APPRAISING ROUGH UNCUT GEMSTONES

Rough gem material is only the beginning of the story in evaluating the final product of the rough. The factors that determine the value are: Supply & demand, Time and money.

Supply and Demand is the basic rule of evaluation in marketing any product. The larger the supply the less the demand which means a lower price. The reason that diamonds maintain their value in the market is not their rarity but the fact that the supply is carefully controlled by the CSO (DeBeers) to maintain those prices. If the CSO put all the diamonds in their vaults on the market their value would plummet to a very small amount of their current value.

Time and Money: The other premise that is true in all business transactions. We have all heard the axiom “Time is Money” and in evaluating a rough gem it is a critical factor in evaluation.

These two factors directly influence evaluation of large rough gem materials. In small sizes this is usually not a factor because we are dealing with a limited amount of a finite product that has pretty fixed market prices. But introduce a large piece that can potentially flood the market with high quality and high priced goods then you have increased the supply to a point that the price plummets. Gems stones other than diamonds sell maybe in the thousands of units in high valued stones in a year. Some of the rarer gems sell only in the tens of stones in a year. If the cutting of a large single piece of gem quality material doubles, triples or more the yearly production then the prices tumble.

A large piece or a large parcel of rough gem material may take a long while to cut and finish before you can market it. In the case of a large single piece it may take months to study it and make sure the cutter cuts the highest and best product from the stone. Also the best color must be taken into consideration as well as the crystal orientation. Many factors must be taken into consideration and they all take time. In this sense the cutter, if he is the buyer, takes the highest risk and should pay the lowest price. There are many things that can go wrong and may lose value while cutting and finishing. On the other hand he is the one who stands to make the most if he does everything right.

Therefore the time it takes is costing the cutter money. The fact that large quantities cannot be sold without hurting the market for that type of gem makes it necessary to sell the stones as the market can bare them without lowering prices. So time becomes a very big factor for all involved. It may take 10 or more years to absorb a number of large pieces of a certain type into the market and get the best price. Although demand may go up you can never overcapitalize on it and ruin the market.

The other factor not mentioned before is Rarity. This is the hardest to determine as far as value goes. Rarity can even be enhanced by media and marketing thus increasing value. And a good story or countenance of a stone can increase the desirability and value. Or just one exceptional stone of size and quality can be priceless and not replaceable by ordinary standards and must be considered only by monetary value.

Thus an unbelievable “Retail Replacement Value” is the result of all the above factors and more and must be considered with weight, color and yield to determine a true value of large rough gem material specimens.

That is the $64,000 dollar question. You need to take all the current market data for retail and auction sales of that gem material, then you need to compare it to the quality of the material you are appraising in all aspects of color, cut, weight and rarity. Again the last one, rarity, needs many years of hands on experience in buying, selling, cutting, polishing, winning and losing money in the same gem material you are appriasing. And rarity can be the most elusive of the values. In all appraising, comparables are the most important single factor in determining value. But a lot of times there is nothing to compare it to and you need to know from experience how to get a value for this piece. When it comes down to it, the opinion of the appraiser is very subjective and personal on these rare pieces. Most of the time I'm very close to what the value is and sometimes I'm totally off, but rarely. However I can justify all my opinions and try very hard to be as unbiased as I can.