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.
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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.

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.

GIA Lab Sees More 5 to 10+ ct HPHT-Treated Diamonds

We publish courtesy of GIA’s G&G eBrief

Author: Wuyi Wang GIA Laboratory, New York


The New York lab has been examining a greater number of large HPHT-treated type IIa diamonds, such as this 18.12 ct round brilliant (top; photo by Jian Xin Liao). The hexagonal graphite inclusion it contained (bottom; image by Wuyi Wang, magnified 112x) is a good indication of this treatment.


Gem laboratories frequently see colorless to near-colorless HPHT-treated type IIa diamonds, most of them smaller than 5 ct. In recent weeks, however, GIA’s New York lab has examined an increasing number of relatively large HPHT-treated type IIa diamonds, many weighing more than 5 ct and some 10+ ct.
One example is the 18.12 ct diamond at right, which was color graded F. While many HPHT-treated diamonds have no observable internal features except for some graining, this stone contained a tiny hexagonal graphite inclusion surrounded by a tension fracture. The inclusion, which very likely formed due to graphitization of the host diamond, and the tension fracture are good indications that this stone was HPHT treated. Careful spectroscopic analysis provided confirmation.
HPHT annealing involves a higher risk of damaging the diamond than other treatment techniques, so it is somewhat unusual to see it applied to such large stones. It is not clear if this surge in submission of large treated diamonds is a short-term phenomenon or the beginning of a trend. One possible explanation is that more suitable starting materials have become available in the market.

Luxury Market to Grow by Double Digits

We publish courtesy of Gems & Gemology eBrief

Authors: Russell Shor


Recovery from the economic downtown has been a painfully slow process for retail jewelers in the U.S. and Europe. The top end, however, is rallying much more quickly, according to a Bain & Co. market study on luxury goods.

The consulting firm predicted that worldwide jewelry sales would rise 13% this year, with the fastest growth (20%) coming from online sales. The report noted that luxury sales in general rose 5% in the first quarter and climbed to 16% by mid-year before slowing a bit in the third quarter. The strongest growth, as expected, is forecast for Asia, but U.S. luxury consumers have returned to the stores and are likely to boost their spending about 12% this year over last.

As if to prove the Bain report, the Oct. 20 jewelry auction at Christie’s New York brought in $52.5 million — 90% by lot and 95% by value — numbers rarely reached even in prosperous times. The top lot, a Bulgari ring featuring a 10.95 ct Fancy Vivid blue diamond and a 9.87 ct G-VS1 diamond, sold for more than $15.7 million. Several pieces with large D-Flawless diamonds broke the $100,000 per carat level. While private Asian buyers took several top lots, most of the jewelry was purchased by Americans.

These auction results underscore a key advantage of the luxury market: it tends to be more international and thus far less dependent on local economic conditions.

Russell Shor
Senior Industry Analyst, GIA Carlsbad

GIA Lab Grades Largest (4+ ct) HPHT-Grown Synthetic Diamond Submitted to Date

We publish courtesy of Gems & Gemology eBrief

Authors: Wuyi Wang and Tom Moses

Synthetic diamonds have improved dramatically in recent years. The GIA Laboratory recently examined the largest faceted synthetic diamond ever submitted for testing and grading: a rectangular sample measuring 9.07 x 8.54 x 5.98 mm and weighing 4.09 ct. It was color graded Fancy Vivid yellow-orange and had notably even color distribution (color zoning is common in HPHT-grown synthetic diamonds). Some strings of black pinpoint inclusions were seen with the microscope; the clarity grade was VS1. DiamondView imaging showed typical HPHT synthetic growth sectors, with patterns of varying intensity and color.

The mid-IR absorption spectrum revealed a high concentration of predominantly A-form nitrogen, as well as isolated nitrogen (weak absorption at 1344 cm-1) — which was responsible for the yellow-orange color. The UV-Vis absorption spectrum showed a typical pattern for isolated nitrogen (gradual increase in absorption from approximately 570 nm to higher energies), as well as features attributed to a Ni-related defect (793.6 nm) and the H2 defect (986.2 nm).

The predominantly A-form nitrogen and the occurrence of the H2 optical center strongly suggest growth at a relatively high temperature. An advantage to high-temperature synthesis is that it limits the development of growth sectors other than octahedra. As a result, the color appears more evenly distributed.

This sample’s size, clarity, and vivid, evenly distributed yellow-orange color were exceptional and demonstrate continued improvements in the HPHT growth technique.

Wuyi Wang and Tom Moses
GIA Laboratory, New York

Sapphire Mining Update – Southern Madagascar

We publish courtesy of G&G eBrief

Author: Vincent Pardieu, GIA Laboratory, Bangkok

Photos by Vincent Pardieu

In July-August 2010, this contributor visited the Ilakaka-Sakaraha and Andranondambo mining areas in southern Madagascar with several colleagues. In addition to collecting reference samples for GIA, our goal was to assess the state of the sapphire industry in the region.

Discovered in 1998, the Ilakaka-Sakaraha deposit extends more than 80 km from the Isalo National Park toward Toliara on the southwest coast. The area produces an abundance of pink and blue sapphires (most of which require heat treatment), as well as a wide variety of other gems.

Many Thai and Sri Lankan dealers have buying offices in the area, and most of the stones are exported to those two countries for heat treatment and cutting. Compared to my previous visits in 2005 and 2008, the number of foreign buyers has dropped, and they are paying lower prices for the gems.

Mining activity has also waned; we found only three small operations (two Thai, one Malagasy) still using machinery. The main mining area was located near Antsoa, southeast of Sakaraha, where about 1,500 miners were active. Antsoa was reportedly producing the best blue sapphires, with fine rough stones up to 10 g.

We found anywhere from 10 to 500 people working at the more than 20 other sites we visited. We estimate that about 50,000 people are now earning a living (directly or indirectly) from sapphire mining in Ilakaka-Sakaraha, half the number reported in 2005.

In the Andranondambo area, blue sapphires are mined from several primary deposits by small groups of artisanal miners near Andranondambo, Maromby, Tirimena, and Siva. The most active mining area appeared to be Ankazoabo (north of Andranondambo), where Malaysian company Nantin Ltd. was operating heavy machinery alongside some 200 artisanal miners using hand tools.

Gem mining in Madagascar, particularly in Ilakaka, has faced many difficulties in recent years. In particular, from February 2008 to July 2009, the Malagasy government banned all gem exports. The main reason for the current decrease in activity seems to be the global economic crisis and the resulting poor market. In turn, the mining community has suffered shortages of food and other necessities, and security issues plague the region. Shrinking margins have led to fierce competition between buyers, and many are considering a switch to ruby dealing in Mozambique.