Precious Gems: Pricing for Propriety and Profit

During the height of the pandemic, a young woman started purchasing gems from me in the hopes of making a business out of it by setting gems into pre-purchased settings (and later, to develop her own line). I tried helping her by sharing some gemstone parcels at cost with her, and giving her advice on purchasing, mainly by trying to steer her away from Instagram purchases from overseas sellers without a clear return policy. At one point she asked me: where do I find out what a gemstone should cost when I do my pricing? Where do I get my price lists so I can come up with a retail price for my customers? 

This is probably a reasonable question when you are doing carpentry with goods purchased from Home Depot. You can look up the cost of wood and screws everywhere and add up your materials to determine your selling price (adding labor, of course). But the gem trade doesn’t work that way, and pricing a gem correctly is very difficult. Firstly, gemstone prices are well protected trade secrets. And markup depends on labor, even if the labor “merely” consists of spending the time making pairs or sets out of parcels, grading melees by size and color, or grading gems by quality. Pricing also depends on how you purchase your goods: are you buying larger parcels of gemstone rough, faceted parcels, or single stones? It depends on where you buy them, i.e., on location, in Bangkok, Tucson. And it depends on how much you can spend. Obviously, the more buying power you have, the lower the price is going to be. Your spending can be over time or all at once, but the cheapest prices come to those who buy on a consistent basis and pay up front. 

It doesn’t have to matter, by the way, if you are buying retail or wholesale, meaning if you have a tax ID or not. First of all, anyone can get a tax ID for anything, it doesn’t mean you actually run a business. Secondly, nobody in Tanzania, for instance, would even know the difference or care. Pricing simply depends on whether the relationship is a one off or ongoing, and on how much you are buying. And if you are buying a large investment piece from a US seller, you are likely to get a much lower markup than if you buy something small.

So, for a retail buyer, is there any way to know what the current value of a gemstone is? Yes. Valuing gems is the job of an appraisal laboratory, like the Gemological Appraisal Laboratory, who provide appraisals for insurance purposes. I’ve seen them go through the process many times. 

Examples of various gem certifications:

First of all, you need the weight and measurements of the gem, which means in most cases that if the gem is in a setting, it has to be taken out. Otherwise one has to guess the weight, and if a gem is in the vicinity of a carat break (say between .95 cts and 1.05 cts), then it can make a huge difference in price. Second, if the gem can be treated then this will affect pricing. Garnet (except some demantoid) and spinel do not have any known treatment, which means one can skip the step of finding out. Whether a stone is lab grown, as can be the case with alexandrite for instance, should be ruled out. For the most part, only a lab can do that. Evidence of heat treatment can usually be seen under a scope, but other treatments can be more complicated to determine, so all that has to be factored in. Not all appraisal labs can determine origin because they do not have a larger comparison database or the equipment for scanning. And large labs like GIA who can determine origin do not provide appraisal value.

Assuming you have all of the correct information about your gem, where does the gemologist get his or her pricing?

This may come as a surprise to you but there are price lists to work with that get published in trade magazines. They are not cheap to come by and not publically accessible, but more importantly, they are not easy to use and provide insufficient information for a lay person. The market constantly changes, and these lists get updated only every three months or less. Additionally, you would have to know how to grade the gem. Each category, i.e. “blue sapphire” will have subcategories not only by weight but also by quality, i.e. commercial quality, or fine quality, and several grades in between. There’s a degree of subjectivity here as well, as you might expect, and only experience with what you are looking at will tell you how to grade the gem. Finally, no two gem types are alike. Emerald is graded differently than Tanzanite in terms of clarity, so a fine quality tanzanite has to be loupe clean, an emerald doesn’t have to be. A fine quality blue sapphire might have to have a certain hue of blue, a fine quality heated tanzanite will in any case be blue and quality will depend just on the saturation, or at best, how much secondary purple there is. Unheated Tanzanite (except perhaps for pink) usually has a lower value, even if the collector’s market extracts a higher price!

The following emeralds are both available in the shop -- their prices are a reflection of their specific clarity, cutting, enhancement and size:

As you can probably imagine, not all gems are listed in these price lists either. Rare gems like grandidierite, hauyne, afghanite, taffeite, benitoite and many others, have no lists at all. Nor do all shades of sapphire or all shades of spinel. “I have no idea, you probably know better than I do” is an answer I have received frequently from GAL when bringing back goods from Madagascar.

What then? Then we do what you might do. Look online. Are there other vendors who sell that gem, and for how much, what is the quality? We prefer to look at largish companies that have been in the business for a few years, not pricing on  Etsy or eBay as it’s harder to determine the quality, and even harder to know if the available data on treatment and origin is correct (even if someone isn’t trying to cheat, they might still make mistakes!). If an internet search turns up nothing, then the appraisal can be left blank, and a vendor like me might try to determine availability in the market to make a prediction about the price. That is, do a standard markup based on cost and overhead (i.e. the cost of your trip), and see what happens. Gemstone evaluation is extremely difficult, even those of us with extensive experience know only a few stones. I am good with spinel, much less so with ruby for instance. I can ballpark it but for a real opinion I have to consult someone else. Paraiba I know very well, alexandrite not nearly as much. 

 

To illustrate the difficulties of gemstone pricing, I’ll end this blog with another anecdote: In 2019 I bought some larger (half carat plus) Benitoite at a then very high price in Tucson. Initially I thought I might have overpaid but I couldn’t find any that size anywhere so I just bought them anyway. I put a lower than my standard markup on them and put them on Etsy. 

A few weeks later, I received an email from the AGTA, cc’ing me on an exchange with a prospective client who had asked the AGTA about one of my Benitoite. The client wanted to know if I was (a) a member in good standing, (b) trustworthy and (c) if my Benitoite was fair market or overpriced. The AGTA representative who cc’d me in his answer wrote something positive about (a) and (b) and then stated that because Benitoite was so rare, the price simply depended on what a seller wanted to demand and if a buyer was willing to pay for it. In short, there was no real reference point. 

This is similar to what happens at an auction. You have a basic idea of what a gemstone or jewelry piece might fetch because of basic costs, but final sale prices can be lower and they can be higher. The selling price, in turn, will be used to help determine the value of similar future pieces.

Did my prospective client buy the Benitoite? Yes, he did. Presumably, my price was acceptable in the end, but I assume what convinced him was the fact that he was able to trust in the purchasing process itself. Prices can be a bit too high and a bit too low for the market in a particular moment, especially when there are market fluctuations due to other problems, i.e. a government crisis, fuel problems, local shutdowns etc., but if the gem is worth it and was bought reputably (and a US auction house would be included here), then that is one’s best bet of having hit it right in terms of the price.