The Rise of Color, Pearls—and Prices

Three factors are throwing a wrench into the way U.S. retail jewelers buy and sell colored stones and pearls: supply, demand, and the declining dollar.

Retail jewelers are discovering it’s almost impossible to find fine large gems. The problem doesn’t affect only rubies, emeralds, and sapphires—if you’re looking for a matched pair of 4.00 ct. tourmalines or an 8 × 10 mm tsavorite, you’re probably out of luck.

According to Stuart Robertson, research director for The Guide, published by Gemworld International, Glenview, Ill., “Buying trends this fall indicate that sales of colored stones and pearl products have strengthened dramatically.” That translates to strong demand overseas where buying power is greatest. That in turn creates a shortage of domestic supply and the inevitable higher prices.

Some believe the supply challenge is the result of increases in consumer markets globally, especially the Far East, China, and India. Donna Baker, president of the Gemological Institute of America, agrees. In her first public speaking engagement as GIA president, to the Manhattan Chapter of the GIA Alumni Association, Baker noted that the gemstone industry, colored stones in particular, will have to acknowledge global competition. “Asia is now at the center of the world’s greatest consumer boom,” said Baker. “China will see jewelry sales of $20 billion by decade’s end—double that of 2001. It is the third-largest single consumer jewelry market behind the USA and Japan.

“Since China’s jewelry demand has been growing by double digits each year, there is strong reason to believe that emerging middle-class consumers there will continue buying jewelry with gold, diamonds, and gemstones at the same or similar pace going forward.”

Eric Braunwart, president of Columbia Gem House and Trigem Designs in Vancouver, Wash., sees the same pressures on supply. “What we’re starting to see is that China and India are investing in colored stones,” says Braunwart. “Before China, the U.S. had the lock on the demand. Now we’re starting to see that change. And that puts pressure on supplies. A lot of the Indian manufacturers are investing in local retail chains.” And the more business Indian manufacturers do with Indian retailers, the less they do with U.S. retailers. That, combined with restrictions on imports to the United States, means U.S. retailers are running out of top-quality gems.

Other suppliers challenge that scenario. They feel strongly that the most important factor driving price increases is declining mine production. “Goods have gotten rare,” says Jeffrey Bilgore, a supplier of fine-quality gems in New York, talking about the top material. He agrees that demand is up but says that even if demand stayed level, supply would be down 20 percent. “And prices never go down,” he says. “People come back from buying trips overseas and say, ‘I can’t believe the prices I just paid,’ and then it’s the first thing they sell. Nobody, of course, ever says that they overpaid.”

“Yes, there is a shortage,” agrees Arthur Groom, Eternity Natural Emerald supplier and retail jeweler in Ridgewood, N.J. “There’s a lack of nice Colombian crystal goods in the market. Dark goods somewhat dominate what you can get. In fact, in August and September, there were no crystal goods at all. Now, Afghanistan is a bit different, but the problem there is just getting the merchandise out. The way they mine, they just don’t have the production.”

As for prices, Groom notes that when you can’t get it, there’s no bargain. “Prices are very firm,” says Groom. “Not because of a greater demand, but from a lack of supply.” And once he obtains goods, he still has to sell to the retailer. “It’s an educational process,” Groom says. “It’s a matter of confidence.”

The weak dollar also hurts supply of colored stones and pearls to the U.S. market.

As distribution trends change, and China, India, and Thailand vacuum up material that used to go first to the United States, less-traditional gem materials are finding a strong domestic market. They include chrome diopside, spessartine garnet, fluorite, prasiolite, iolite, Peruvian opal, moonstone, and sunstone/andesine/labradorite, much of which is available to millions of viewers of television shopping channels. Designers have been working with these stones for the past several years because of their traditionally lower cost.

But, as shortages of the popular fine gems continue, demand is increasing for these lesser-known goods, creating another supply challenge for U.S. brick-and-mortar jewelers as prices are driven up. As an example, according to The Guide, prices for moonstones—moonstones!—have gone up 20 percent to 25 percent in a year.

The pearl market is emulating the colored stone market—top-quality, large, colorful, and unique pearls are going to Asia first, writes Robertson. Varieties include large white South Seas baroques, large peacock Tahitians, and even Chinese freshwaters. Robertson also notes that CFWCP rounds, petals, and coin shapes are the most popular and are dominating the category. Baroques would do well if supplies weren’t so limited.

Fine-quality akoyas are steady, but lower qualities are being shut out by Chinese freshwaters, whose combination of quality and price point makes them hard to compete against.

Because cultured pearls are taking center stage, more information is necessary for consumer confidence, notes Baker. GIA will introduce a pearl grading report, which will be ready for market early this year. (See “GIA, Version 5.0,” p. 112.)

Joel Schechter, chief executive officer of Honora in New York, tells JCK that Honora has been able to hold prices steady. “Supply for us has been really strong,” he says. “And we have been able to keep up with the vastly rising market demand. We are really busy here.”

Longer-length strands are big winners for Honora. “We’re seeing a lot of demand for ropes, especially from the mid-50s (54 inches) to the mid-80s where you can triple and quadruple strands around the neck,” he says. Necklaces of 36 inches, which can be doubled, are still strong this year, too.

Schechter says virtually all varieties and shapes are doing well in fine quality, especially less traditional shapes such as baroques, coins, rondelles, ovals, and pears. “Petal pearls and single-row keshi are also very popular,” he says. “We’re seeing a lot of beautiful stock in 8, 9, and 10 mm and up.”

Expect standard sizes for keshi to get larger as crops become larger. “And the quality of the harvests seems to just keep getting better and better,” says Schechter. “We’ll see even more of it in the future.”

Quantities and color varieties of fine-quality pearls have been increasing because crops in general have been increasing. In color, Schechter especially likes chocolate pearls. Typically found as enhanced Tahitians, Honora is even doing chocolates in enhanced freshwaters.