Even so, no seasoned gem appraiser is likely to suggest buying gemstones as an investment. "A jewelry investment is not income-producing like real estate or stocks," notes Lisa Hubbard, execu tive director of International Jewelry at Sotheby’s. "Diamonds tend to go up and down with the value of the stock market. Still, they retain an intrinsic value and enjoy a worldwide demand. While a high-quality diamond or gem might not make money, it’s not likely to lose its value either."

The private jewelry portfolio has the added advantage over securities investments of being informed not by yield curves, interest sensitivity, or rates of return, but by beauty, a sense of romance, and old-fashioned sentimentality. A parure of perfect diamonds, after all, adorns the ears and neck of one’s beloved so much more attractively than a matching set of convertible bonds.

When sourcing investment-grade tokens of affection, important collectors generally turn to the auction houses, through which the rarest and most extraordinary pieces pass. Certain gemstones and jewelry designs are more likely than others to maintain or increase their value over time. Gem appraisers and auction specialists agree that the best investments are very high-quality, unusual gems, fancy-colored diamonds, and exceptional signed period pieces from noteworthy companies or designers. An important jewelry sale at a large auction house such as Christie’s, Sotheby’s, or Phillips, de Pury & Luxembourg is likely to present the greatest variety of period designs and jewelry from most of the famous houses—including Tiffany’s, Van Cleef & Arpels, and Paul Flato—under one roof.

"Auctions are also a major source of wonderful stones," Hubbard points out. "Oftentimes, an exceptional gemstone has been in the hands of one family for generations, and when it comes time to sell, they bring it to auction for the best exposure." Only a large auction house possesses the clout to attract an international audience of collectors and dealers who are capable not only of recognizing the qualities of a special gem, but also of summoning the means to pay for it.

Caveat Emptor
Auctions, too, are the arbiters of price with respect to vintage jewelry and rare gems. The dynamic of the auction environment often favors sellers, who may get well beyond the estimated value of a particular piece at auction. Buyers should be cautious and not let their emotions get the better of them. "If a buyer is disciplined, they will not get too emotionally involved with an item," explains Simon Teakle, head of Christie’s New York jewelry department. "They should realize there is always another sale."

For many seasoned collectors, winning or losing a coveted lot matters less than the sport of bidding. Untrained buyers, however, can be easily misled at a jewelry auction. Despite the considerable pedigrees of the auction houses, relying on their expertise alone does not obviate the need for skepticism. Veterans know, for example, that auction houses guarantee only the bold or capitalized heading of items in the catalogs; they do not stand behind the fine print describing the item below the headline. While the auction houses do their best to accurately represent lots, the information remains a matter of opinion, not of fact, as the disclaimers at the backs of the catalogs remind us. (Click image to enlarge)

Industry experts agree that the greatest opportunity for a sustainable investment in jewelry and gems today is untreated colored gemstones, primarily rubies, sapphires, and emeralds. "Make sure the stone is accompanied by a laboratory report verifying its natural state," warns Antoinette Matlins, a gemology consultant who has authored several books on jewelry and gems including, Jewelry & Gems at Auction and Diamonds: The Buying Guide. In her own research, she once discovered firsthand a gem that had been misrepresented at a major auction firm. While examining a diamond listed as natural in an auction catalog, she recognized that the stone was actually fracture-filled to conceal its flaws, and that its value was considerably less than its auction estimate.

When making a high-ticket purchase, examine the descriptions carefully in consultation with a gemologist. If a fabulous 30-carat sapphire does not list "natural" or "untreated" in the catalog, then it has probably been enhanced. Today, there are a growing number of sophisticated methods for perfecting diamonds and gemstones that are increasingly difficult to detect. While an enhanced stone can appear as exquisite as a natural gem, buyers must identify these characteristics in order to properly assess its value. Furthermore, some heat treatments may impact the durability of a stone over time, and an emerald that is oiled for improved clarity may require re-oiling to maintain its beauty in the years to come.

Even a signed piece should be carefully examined and certified to ensure authenticity. A beautiful Art Deco design might be listed as a signed Cartier piece, whereas, in fact, a stone may have been replaced, or it may have been altered from its original design in some other fashion. Interested buyers of such an item should consult an expert at Cartier, who, for $1,200, will provide an Authenticity Service that confirms the provenance of its pieces. The house needs at least two to four months to authenticate a design.

"A certificate that authenticates a Cartier piece will increase its value tremendously at auction," notes Stanislas de Quercize, president and CEO of Cartier. The house receives numerous requests to authenticate jewelry and watches that turn out to be altered designs or fakes—some of which were purchased at reputable auction houses. "We have seen many people leave in tears when they discover they have purchased a fake," he says.
"Anyone serious about building a beautiful jewelry portfolio that can be worn and enjoyed or passed on as heirlooms should consult a certified gemologist independent of the auction house," Matlins cautions. Most large jewelry auctions tour major cities worldwide prior to the sale, giving clients the opportunity to bring their own gem consultants to carefully examine pieces. Even a novice, though, can gain knowledge and confidence by consulting the auction house’s own staff of qualified gemologists and appraisers, who are readily available to meet privately with clients about specific lots and investments.

Hubbard advises her clients to purchase the very best in any given category for a more secure investment. She recommends, for example, that a client buy a D-flawless 5-carat diamond over a 20-carat mediocre-quality diamond. "Exceptional quality is always rare and desirable."

The demand for high-quality, natural gems is reflected in a recent Sotheby’s auction where a natural 5.33-carat oval ruby ring, flanked by triangular diamonds, fetched approximately $363,690. The ruby, certified as Burmese with no evidence of heat treatment, had a pre-sale estimate of $250,000 to $350,000. Smart buyers, on the other hand, can uncover good value at the auction if they are observant. "Most people overlook an ugly piece of jewelry at auction, but I advise clients to consider the stones in the design," says Matlins. "Sometimes the sum of the parts is greater than the piece."

Priceless by Design
"The value of diamonds and colored stones is easier to measure than jewelry designs," observes Teakle of Christie’s, "since most important stones have lab certificates verifying their quality, and a buyer can look at comparable auction sales of similar stones over the past several years for a benchmark on its value."

Buying jewelry for its design rather than the value of its gems can be an unpredictable investment. Certain houses and designers are perennial favorites. Still, a Verdura or Fouchet signature does not necessarily make a bracelet either desirable or valuable: Even the best designers are subject to an aesthetic blunder. Generally, though, a signed piece of jewelry from the likes of Boucheron is likely to fetch a higher price at auction than a similar unsigned piece of jewelry. Furthermore, a signed piece from a particular house during its heyday—such as Art Nouveau designs from Lalique or Fouquet, Art Deco pieces by Cartier, or Forties pieces using the mystery setting from Van Cleef & Arpels—will always command top prices. "A signed Cartier Art Deco bracelet may have sold for $15,000 in the ’20s," remarks Chris Del Gatto, chief executive officer of Sell Jewelry, which buys high-end gems and jewelry from private clients. "But now that same bracelet could command perhaps $300,000." (Click image to see partial close-up)

Other factors, too, can elevate the desirability of designer jewelry; these include an interesting provenance or a specific period or style that enjoys current vogue. The perfect alignment of beautiful design with a prominent signature and a prestigious provenance occurred at Sotheby’s last April in an auction lot that fetched nearly three times its estimate. Verdura’s "Mermaid" brooch, circa 1945, features a gold mermaid perched atop a crystal wave rippling with blue sapphires. The piece, from the estate of philanthropist Barbara Pauley Pagen, had an estimated value of $10,000 to $15,000; it sold for $42,000.

Exceptional contemporary designs also attract collectors’ attention at auction. JAR by Joel Arthur Rosenthal in Paris, for instance, generates significant buzz at auction. The designer creates very few one-of-a-kind pieces each year, and often refuses to see new clients. The appearance of one of his pieces at auction—such as the dramatic diamond ear clips with an estimate of $125,000 to $150,000 that graced Christie’s sale in October—sends anxious collectors clamoring to snap up these heirlooms-to-be for future generations.

Future value aside, however, in the end, beauty is what most buyers behold. "In the final analysis," concludes Teakle, "disregard the magnifying glass and statistics, and look at the pure beauty of the gem or design. Beauty is a great pleasure, and it’s the best investment."