Industry Analysis: Holiday Sales Off to a Strong Start

We publish courtesy of Gems & Gemology GIA Insider

Author: Russell Shor, Senior Industry Analyst

 

This 27.19 ct D-IF dimaond sold for $3.66 million at Sotheby's Dec. 9 Magnificent Jewels auction in New York. Photo courtesy Sotheby's.

 

 

 

This GIA-graded Fancy Intense pink diamond brokle two records: the most ever paid for a gemstone at auction and the highest price per carat ($1.86 million). Photo courtesy Sotheby's

 

 

 

 

The biggest development of this final month of 2010 is the spate of good news. Top jewelry auctions continue to break price records around the world, while the U.S. holiday shopping season indicates that jewelry is high on the buying list for everyday consumers.
One retail analyst group, IBIS World Inc., estimates that jewelry demand will rise 6% over the 2009 season. Earlier in the year, analysts were forecasting increases of around 2-3%, based largely on predictions of increased spending among the wealthiest buyers. Retail jewelers report, however, that sales have risen higher than expected across the board since mid-November.
Press reports and anecdotal evidence indicate that both the volume of sales and the average ticket price will be up significantly over the same period last year, even adjusting for gold price inflation, as consumers feel more comfortable spending. The Centurion newsletter survey reported that some 60% of luxury jewelers have posted double-digit sales increases thus far, while an additional 14.8% were up between 6% and 10%. Tiffany & Co. and Blue Nile have had seasonal gains of 10% and 12%, respectively.
Independent retailers are also optimistic about the season. Traditionally, as much as one-third of their holiday sales take place during the final 10 days before Christmas.
One reason for the better-than-expected retail sales is that most economists are no longer warning about a “double dip” recession. The consensus is that while a struggling job market will remain a drag on recovery, the economy will continue a slow growth through 2011. In addition, U.S. corporate profits have been quite strong the past two quarters, which suggests that those who have jobs may no longer fear losing them or being subjected to cuts in wages and hours.
In Europe, the fiscal troubles of Ireland and possibly Spain have unsettled the European Union. But while the European recovery remains slower, there is no talk of these problems pushing the world back into recession, as was the case last summer when Greece’s problems came to light.
The ultra-wealthy continue to flock to very large colorless and top fancy-color diamonds and extremely fine-colored stones. The Nov. 16 Sotheby’s auction in Geneva was a record-breaker on a number of fronts. It was the first $100 million-plus jewelry auction ever. Nearly half of that total, $46.1 million, went to a 24.78 ct GIA-graded Fancy Intense pink diamond that broke two records: the most ever paid for a gemstone at auction and the highest price per carat ($1.86 million).
The following day, at Christie’s Geneva, two Colombian emeralds sold for extremely high prices: A 25.83 ct octagon-shaped stone went for $1.04 million, while a 9.27 ct Muzo stone drew a winning bid of $824,720.
Sotheby’s Dec. 9 Magnificent Jewels auction in New York broke a sales record for that venue: $53.2 million, with 10 lots selling for more than $1 million. The top lot was a 27.19 ct D-IF diamond that sold for $3.66 million, or nearly $135,000 per carat.
Meanwhile, preliminary reports from the Dec. 13-17 Diamond Trading Company sight put it at about $450-$475 million. Diamond manufacturers hope the encouraging U.S. holiday season, coupled with continued strong demand from India and China, will break the impasse over polished prices that has lasted for six months.
Rough prices have increased far ahead of polished, as cautious retailers and jewelry manufacturers still refuse to pay higher rates. A number of manufacturers, particularly in India, stopped polishing certain sizes, preferring to hold them until prices improve, instead selling from inventory or stones sourced from the secondary market.
Russell Shor
Senior Industry Analyst

 

 

From Gems & Gemology: Smartphone Photomicrography

We publish courtesy of Gems & Gemology GIA Insider

G&G managing editor Thomas W. Overton prepared the following entry for the journal’s Gem News International section.

Figure 1. This inexpensive microscope accessory clips over a smartphone camera lens. Illumination is provided by LEDs. Photo by Robert Weldon.

Figure 2. Taken with an Apple iPhone and the clip-on microscope in figure 1, this image shows a “lilypad” inclusion in peridot. Photomicrograph by T. Overton; field of view approximately 4.0 mm.

Smartphones such as the Apple iPhone, Motorola Droid, and Nokia N8 have become increasingly popular in recent years. Top-end models typically feature good-quality digital cameras that rival some “point-and-shoot” cameras, in addition to having basic photo editing software.
The popularity of smartphones has also spawned the development of numerous accessories that can expand their functionality even further. One such accessory is a low-power microscope that clips onto the phone over the camera lens. This contributor was interested in seeing if this device could have gemological applications.
The microscope accessory in figure 1 was ordered on the Internet for less than US$20. Its sliding housing offers varying levels of magnification, and illumination is provided by two white LEDs. The lighting assembly can be rotated about 45° to change the angle of illumination.
Although this device is clearly not optimized for gemological use, with some practice it was possible to produce serviceable photomicrographs. The images in figure 2 was taken with an Apple iPhone 4 using the ProCamera photography application, which allows manual adjustment of focus and white balance. As with any photography, the biggest challenge was the lighting. The LEDs proved too bright in most situations, and better results were achieved by partially shielding them or turning them off and relying on ambient light. Although the microscope’s packaging promised magnification up to 60x, in practice it was impossible to obtain good focus beyond medium power (approximately 20x). The best results were produced with a combination of the phone’s digital zoom, careful adjustment of the autofocus, and a steady hand.
This device clearly will not replace a standard gemological microscope or even a loupe, but it appears to provide a useful field tool in the gemologist’s arsenal.
To subscribe to G&G, visit the GIA Store, contact circulation coordinator Martha Rivera atmartha.rivera@gia.edu or call toll-free (800) 421-7250, ext. 7142. From outside the U.S. and Canada, call (760) 603-4000, ext. 7142. To purchase PDF versions of articles or sections, visit Gems & Gemology Online.
You can find the device here. Please note that the Gemma News Service does NOT guarantee the reliability of the dealer. We just found it on the web.

An Exceptional Rainbow of Rare Stones

We publish courtesy of  New York Times

Author: NAZANIN LANKARANI

LONDON — Alisa Moussaieff, head of a multimillion-dollar jewelry enterprise specializing in exceptionally rare and precious stones, has a relationship with the raw materials of her trade that is both romantic and practical.

“We deal in everything that is beautiful, rare and valuable,” Mrs. Moussaieff said in an interview.

But beyond mere beauty, “top quality gems, by virtue of their rarity, keep their value, even in uncertain economic times.”

Even as global investors have increasingly come to the same conclusion, turning to gemstones as a safe asset class, Mrs. Moussaieff, 80, along with Laurence Graff, has continued to hold sway in the market as among the world’s most important buyers of precious stones. Her legendary collection of colored stones, amassed over the past half-century, boasts some of the world’s most exceptional diamonds, not least among them the Moussaieff Red, the world’s largest fancy red diamond.

Three years ago, Mrs. Moussaieff opened a lavish new store on New Bond Street, London’s exclusive jewelry district, a stone’s throw — for extravagant clients — from Graff, Asprey, and Harry Winston. In such opulent company, it might seem a challenge to stand out from the crowd. But what immediately distinguishes her displays from those of her competitors is the sheer volume and variety of spectacular parures and sparkling gems on offer.

Still, for Mrs. Moussaieff, show is one thing, work another. When design fever seizes her, she quits the Bond Street store, with its plush showrooms, multiple offices and concealed V.I.P. rooms, and heads back to the tiny back office of the shop that she and her husband first set up in the lobby of the Park Lane Hilton Hotel, when they moved to London in 1963.

Pushing open the door of the windowless room, in the center of which a table is barely visible under piles of gem certificates, tools, wires and colorful loose stones, she said: “This is where I live.”

“My billionaire clients don’t mind sitting here with me. I throw diamonds on the table, and together we choose the stones and the design. Out of this chaos are born many beautiful pieces.”

Mrs. Moussaieff has always been the driving force of the business that she officially took over when her husband, Shlomo Moussaieff, son of an established Jerusalem jeweler and descendant of a family of Bukharian gem dealers, retired in 2004.

Today, assisted by her daughter Tamara, now the house of Moussaieff’s designated stone buyer, Mrs. Moussaieff uses her significant buying power to acquire the world’s rarest gems while catering to a clientele of celebrities, royal families, wealthy Middle Easterners and a growing base of Asian and Russian customers.

Though her business has built a reputation of unwavering commitment to size and quality, Mrs. Moussaieff has a very personal approach to precious stones — an approach that she calls her “eccentricity.”

“I am not impressed with the size of a diamond, nor by its purity,” she said. “Something can be imperfect and still be extremely beautiful. For me, a stone must have charm and a life of its own, apart from its certificate, which just helps sell it.

“A certificate is what it is, but your eyes are your eyes. You may repolish a stone to improve its clarity, but the question is, will it keep its charm?

“I prefer to have a less good certificate but a more charming stone. It is a luxury we can afford.”

Charm comes in many shapes and sizes. In 2001, Moussaieff acquired a triangular, or trilliant-cut, internally flawless red diamond, weighing 5.11 carats, the biggest Fancy Red ever graded by the Gemological Institute of America. The exceptionally rare stone — which she renamed the Moussaieff Red — was exhibited at the Smithsonian Institution in Washington in 2003 and at the Natural History Museum of Los Angeles County last year.

“We paid over $8 million for the stone, including to the intermediaries without whom a deal could not have been made,” she said.

Diamonds may be forever, but ownership, if you are a jeweler, is not.

“We will eventually sell it,” she said. “I will be sad to see it go. For the time being, I am happy to live with it.”


GIA’s lab receiving HPHT diamonds up to 18 cts

We publish courtesy of National Jeweler

Photo by: GIA

New York — The Gemological Institute of America (GIA) has noted an uptick in the number of 5- to 10-carat high-pressure, high-temperature (HPHT) treated type IIa diamonds, the lab reported in the latest edition of its Gems & Gemology eBrief.

Authored by Wuyi Wang of GIA Laboratory, New York, the report says the New York lab has examined an increasing number of these larger treated diamonds in recent weeks, with some of the stones weighing more than 10 carats. This included an 18.12-carat diamond that was color graded F. Careful spectroscopic analysis provided confirmed that this big stone was HPHT treated.

The eBrief goes on to state that it is “somewhat unusual” to see larger HPHT-treated diamonds, because HPHT annealing is more likely to damage the diamond and so isn’t typically used on larger stones. It is unclear if this is a new trend or just a few isolated stones, but GIA theorizes that one possible explanation for the larger HPHT-treated diamonds is that more suitable starting materials have become available in the market.

Wikileaks say Mugabe gaining from “blood” diamonds

We publish courtesy of National Jeweler

Washington, D.C. — Confidential U.S. government documents recently leaked through controversial news source WikiLeaks show that U.S. diplomats suspected Zimbabwe’s president, his family and top associates were profiting from the sale of “blood” diamonds from the nation’s controversial Marange fields.

According to cables released by WikiLeaks and reported by United Press International (UPI), sources in Zimbabwe told the United States that Gideon Gono, head of Zimbabwe’s central bank, made thousands of dollars a month selling diamonds from Marange and funneled the money to Robert Mugabe, his wife, his sister and top members of the Zanu-PF party. Diamond panners in the area were attacked with dogs and gunned down from helicopters, with a 2008 cable released by WikiLeaks titled, “Regime Elites Looting Deadly Diamond Fields.”

A cable also stated that, “In a country filled with corrupt schemes, the diamond business in Zimbabwe is one of the dirtiest.”

Trade in rough diamonds from the Marange fields technically remains suspended as the Zimbabwean government and members of the Kimberley Process (KP), the body charged with stemming the flow of “blood” or “conflict” diamonds into the industry, try to hammer out an agreement for trade from the area to resume.

Australian Julian Assange launched WikiLeaks, a non-profit media organization, in 2007. Since late November, the site has been publishing thousands of confidential U.S. diplomatic cables that have embarrassed U.S. officials and led to a government crackdown on the site.

Site founder Assange is in police custody in Britain after Sweden issued a warrant for his arrest in connection with sex crimes in that country. He has denied the allegations.

On Monday, Reuters reported that Assange’s former deputy, Daniel Domscheit-Berg, was starting another WikiLeaks rival site called OpenLeaks.org. The site is not yet operational.

Zimbabwe nationalizing all its diamond mines

We publish courtesy of National Jeweler

Harare, Zimbabwe — The state-controlled newspaper in Zimbabwe reported Thursday that the government there plans to take 100 percent control of all alluvial diamond mines—which would include the controversial Marange area—and at least a 51 percent stake in all other mining projects.

The Herald’s report cited government official Saviour Kasukuwere as saying that Zimbabwe’s cabinet had determined that the country’s natural resources, including diamonds, must benefit Zimbabweans and that 10 percent of gross profit from all mining operations will go to local communities. Zimbabwe government officials plan to meet with the Chinese and South African companies currently working with the government at the Marange diamond fields.

Marange, the site of reported diamond smuggling and human rights violations, has been a source of controversy for the Kimberley Process (KP), the mechanism put in place to stem the flow of conflict diamonds into the diamond trade. Trade in rough from the area remains officially suspended for the time being as members of the KP and the Zimbabwean government continue to negotiate conditions for allowing exports to resume.

According to The Herald, outside of alluvial diamond mining, the proposed law also would affect all other new mining ventures and companies yet to meet the country’s indigenization requirements. Zimbabwe’s Indigenisation and Economic Empowerment Act dictates that foreign-owned companies operating in the country valued at more than $500,000 sell at least 51 percent shareholding to indigenous black Zimbabweans.

The new law regarding mining will take effect as soon as it is officially published, The Herald reports.

Analysis: Canadian diamond miners set to satisfy gem lust

We publish courtesy of REUTERS

Author: Julie Gordon

 

(Reuters) – There may not be snow on the ground yet on Bay Street, but Christmas could come early this year for Canada’s diamond miners who are among the few with the gems to supply growing global demand for high-end jewelry.

In the world’s largest diamond market — the United States — upscale retailers like Tiffany & Co (TIF.N) and Harry Winston (HW.TO) are seeing higher sales as demand for $50,000 engagement rings rebounds.

Diamonds are also the new gold for an emerging upper middle class in China, India and Russia. And they offer a safe-haven substitute for volatile currencies.

Analysts say maximum global diamond extraction rates, or “peak diamond”, have come and gone, with little chance of another massive diamond discovery to replace aging mines.

And while Russia still has $1 billion worth of diamonds stockpiled from the global financial crisis, Moscow has said it does not have plans to start selling them into the open market.

That all adds up to good news for Canadian miners. In 2009, the country was the world’s number three diamond producer, mining $1.47 billion worth of rough stones.

With new discoveries in the Northwest Territories, Quebec and Nunavut, Canada could become the world’s top producer — and with lust growing for the sparkling jewels, analysts expect to see some projects fast-tracked.

“For companies who have real diamond prospects, real potential to mine, it’s going to become easier for them to raise money.” said RBC Capital Markets analyst Des Kilalea. “And that’s going to be quite good for Canada.”

Kilalea said at least two new mines would likely come on line in Canada within the next five years, coincidentally the same timeframe when global diamond production output is expected to start to decline.

“There’s a multitude of Canadian companies that are looking,” he said, listing explorers like Peregrine Diamond (PGD.TO) and Shore Gold (SGF.TO). “So it’s likely to be a growing space for Canadian investors.”

He said that Mountain Province Diamonds (MPV.TO) and Stornoway Diamond (SWY.TO) are leading the pack, adding that bringing a new diamond mine online takes over a decade.

Mountain Province’s 51 million-carat Gahcho Kue mine in the Northwest Territories, which is a joint venture with global diamond giant De Beers, is expected to be in production by 2014.

“Gahcho Kue was the last major discovery, and that was 15 years ago,” said Mountain Province Chief Executive Patrick Evans.

“There are further deposits out there, and further big mines will be discovered,” he said. “The demand for rough diamonds is going to continue to increase.”

Already a driver of global commodity demand, China is seen overtaking the United States in the next decade as the world’s top diamond buyer, thanks largely to a swelling middle class that is increasingly ostentatious in its displays of wealth.

“And that’s when the impact of peak diamond becomes felt in prices,” said RBC Capital Market’s Kilalea.

With disposable income levels on the rise in Asia and Eastern Europe, and as debt worries plague the U.S. dollar and the euro, emerging market investors are also increasingly looking to diamonds as a safe place to store their money.

“They would much rather have pocket full of diamonds and a truck full of gold,” said Paradigm Capital analyst David Davidson. “Hard currency of some nature is better than U.S. dollars.”

Moreover, the rocks are still seen as an investment opportunity, with gold prices at record highs and investors just beginning to see the potential for diamonds.

“It’s one of the sectors that, probably in the last year, hasn’t really caught on like gold and base metals,” he said. “So I think it’s a catch-up trade.”

And the trade is certainly catching up. On Thursday, diamond miner and retailer Harry Winston reported a 192 percent increase in quarterly rough diamond sales.

“Diamond demand in the Far East continues to propel rough diamond prices,” Harry Winston Chief Executive Robert Gannicott said in a statement.

The Canadian miner also saw retail sales soar 48 percent, as the upscale jewelry market in the United States recovered and branding efforts in Asia paid off for its boutique diamond salons.

With holiday shopping already well under way, both diamond retailers and miners expect sales will keep rolling in.

“Its Christmas time,” said Davidson. “Everybody’s going to go out and buy diamonds.”

(Editing by Pav Jordan and Rob Wilson)