Demand for ruby and sapphire remains tied to the high and low ends of the market
Demand for colored stones remains positive for the second half of 2013. But recognizing which price points are active is essential to capitalizing on the momentum. Since the 2008 recession, active price points have declined. This occurred at the same time that demand for gemstones was growing overseas, particularly in China. As a result, U.S. wholesale prices for many gem and gold products increased. This occurred simultaneously with a decline in household wealth for a majority of Americans. The net effect was diminished buying power for consumers. This created an unusual challenge for U.S. jewelry retailers faced with determining an adequate inventory and product mix suitable to the current conditions.
While household wealth has diminished for a majority of Americans, it has risen for the top percentile of earners. In this sector, gems and fine jewelry sales rose, motivated by investment and wealth preservation. Buyers have been most active at the high and low ends of the market. Sales at the midlevel price points have been slow to return. “It is better than last year, but it is still very irregular,” says Roland Schluessel of San Francisco–based Pillar & Stone. “Consistency is missing.” Further challenging business are consumers’ efforts to circumvent traditional market boundaries. “More than ever before, many ‘smart buyers’ are trying to circumvent retailers by finding their way directly to the wholesaler,” says Schluessel. “Some of them do not understand why we do not work with privates, while others understand and accept it.” In today’s Internet age, many consumers appear to want the wholesale price along with the service and security of shopping at their local retailer.
Red and Blue States
Strong prices continue to be the norm for fine-quality ruby and sapphire. We may see some easing later in the year, but not much. “The Chinese are still buying aggressively, though much less recklessly than they were a year or two ago,” a Bangkok-based dealer tells JCK. Buyers from the larger Chinese firms are traveling to acquire material at the source. “Sri Lanka is now the place to buy sapphire, but prices there are far from cheap,” says the dealer. “Prices have increased about 30 to 50 percent for finer material during the past year.”
Rising sapphire prices have presented a challenge to retailers. Historically, this has been the most popular colored stone in the U.S. market and still is. Many dealers are pointing to higher sapphire prices for the recent spike in demand for quartz, tourmaline, garnet, and beryl varieties.
Regarding ruby, the low end of the market has been flooded by glass composite material. This is unfortunate and poses some long-term credibility issues for the trade. In the finer-quality material, the story is all about price and scarcity. Customers think they want fine Burma ruby until they hear what it’s going to cost. The lack of larger fine Burmese rubies has changed dealer attitudes.
Once it was Burma or nothing, but today, rubies from alternative sources in Africa enjoy good demand. As expected, this has led to a strong run-up in price. Gemstone specialist Jeffery Bergman notes that “Mozambique ruby prices seem to have peaked after virtually doubling over the past year.”
Prices for fine ruby, especially top Burmese goods, are less predictable than they used to be. The sharp decline in availability has resulted in record auction prices, which continue to fuel further increases in dealers’ asking prices. Bergman also notes that lighter “pink-red rubies remain a distinct bargain and are expected to be the next color category to experience an upswing in both demand and price.” In addition to alternative sources, dealers also report very strong interest in rubellite and red spinel, both of which have a similar color to ruby, but are more affordable.
Overall demand is still solid for the classic three gems: ruby, sapphire, and emerald. Their higher prices, however, have reduced access to a growing number of consumers. This has opened the door for many less costly gem materials in similar colors—including spinel, sphene, diopside, and tourmaline—to serve as fashionable alternatives.
