DIAMONDS AND GEMSTONE - WHERE'S THE VALUE?

Throughout the centuries gems along with metals like gold played a significant role in the cultures and economies of many countries. The lure of the beauty and rarity of these natural materials has long been recognized in religious and ceremonial events from the dawn of time. This recognition of these materials gives them value. Just as today we have birthstones and engagement rings that impart value to specific materials for ceremonial or religious purposes. We have made them valuable to ourselves. DeBeers has done a magnificent job of imparting value to diamonds. They have created an artificial chain of supply and demand that they have convinced the buying public is real and why diamonds are so expensive, basically because they say they are.

"People want to buy rarity. They want diamonds and color gemstones that are not easy to replace."
Rahul Kadakia, Christie's
November 20, 2008
Reuters

Anytime a culture or a religion imparts value to objects or natural wonders there are always those crafty folks who can figure out how to exploit and capitalize on them. Cecil Rhodes the founder of  DeBeers had a simple idea, if you control all of a commodities sources (a monopoly), then you control it’s value. Thus the development of the CSO (Central Selling Office) and the control of the prices and supply of diamonds in the world today. This is the basic premise used by many countries, companies and individuals who have amassed huge fortunes of natural resources, land and markets.

For most of the Modern Era, gold was used to back most currencies on the world markets. And still is   

Now comes the usurper, gemstones. With the control exerted by the CSO on the diamond market it is almost as consistent as the metals market. But gems, other than diamonds, are a free ranging entity of wild and crazy values, supplies and assortments. Their values are based mostly on rarity, supply and demand and the vagaries of the market place. The perfect situation for those crafty folks, again to make a killing. Manipulating the market seems a little too easy when you are on the inside of the gem trade.

"We believe...especially because of the current economic climate people turn to more valuable goods. Objects of high value are more stable and inflation-proof, and, therefore, a good investment."
Pejmani spokesman
Marketwatch
December 1, 2008

Lets take Tanzanite for example. This beautiful natural gemstone is a variety of a very common looking mineral known as Zoisite. Normally zoisite is yellow to greenish yellow in color, but in a single location in a mine in Tanzania, it was found in a variety of blueish purple and reddish browns. This material when heated slightly (600^◦ C) became a striking violet blue color and became known as “Tanzanite”. This proposal to market the gem under a new name was construed by Tiffany & Co. as a marketing ploy. Now this created the perfect conditions the CSO enjoyed, control of the source, the price and the supply for a monopoly. The profits were scandalous. I shared in them, with some contraband rough material I bought in Bangkok from an independent seller who smuggled it out of Africa. I got a great price and so did he and we both took advantage of the control that Tiffany exhorted on the gem for our own profit.

This scenario has been repeated many times on many different gems and imitations. When Cubic Zirconia first came from Russia it was extremely expensive until of course those crafty folks figured a way to mass produce it and sell it to the public as the best diamond stimulant with names like Diamonaire, Diamonique, Fuax Diamond, etc. etc.

My own appraisals have been misrepresented on some occasions by using an Insurance appraisal as a tool to sell a gem or piece of jewelry to an unsuspecting buyer for a lot more than what they can sell it for in the market. This stratagem has been used to borrow money from lending institutions for gemstones that have been appraised at Retail Replacement Value and are the collateral for the loans. In my appraisals I always include the definitions of the type of appraisal it is and what it is designed for. But of course it seems the only thing anyone sees is the dollar figures not the written explanations included as qualifiers.

“An appraisal is the educated opinion of value by an experienced and trained Gemologist for the purpose of determining a price for a number of specific reasons; Insurance Replacement, Fair Market Value, Liquidation Value, Wholesale, Breakup Value, Divorce, Court Ordered Liquidation and many more scenarios. These values come down to what a willing buyer will pay to a willing seller in a sale or what the owner of the property will settle for in a disputed value. In other words they are not etched in stone but are variable and conform to each particular situation. As in any opinion it is subjective to the appraiser and is never an offer to buy from the appraiser.”

Now just like the junk bonds that represented all the overpriced real estate, appraisals were used and still are, to inflate the value of gem materials so that the banks will loan more money than those materials could be sold for at liquidation prices. The banks of course were looking at how much they were going to make and they felt covered by the piece of paper that said it was worth so much more. Just like the property appraisals that they based their real estate loans on. In a word, Greed, without sufficient due diligence.

So my beloved gemstones, the things that dreams are made of, are used as mere commodities for the scammers to use to debase another treasure of nature.