Shiny objects are not only just pleasing to the eye—they often represent fluctuations in the global economy. The fact that investors infuse a copious amount of money into gold is well known. The price of the metallic substance has reached $1,900 this past week. Often times, the possession of gold shares is usually indicative of personal fiscal prosperity. However, in recent times, growing prices are also beginning to venture into facets of a similar economy—gemstones.
International dealers of precious gems have stated that “prices for high-quality rubies are up by 50% this year and have doubled in the past two years”. Top-notch sapphires and emeralds have also nabbed considerable gains in price as well. This boom has even had far-reaching repercussions in the market of semi-precious stones, boosting up by “20-25 % this year”. Certainly, there are several potent forces instigating the price rises.
First, one only has to look at the insatiable demand stemming from rapidly-growing economies like China and India. Both countries have a long-standing obsession with colored stones, in part due to a positive connotation in consumer’s tastes (eg yellow sapphires in Hinduism). Because of this passion for gemstones and willingness to have expensive supply costs, Chinese wholesalers are often setting the equilibrium price. The yuan has become the denominating currency for gemstone prices, beating out the dollar in fierce competition.
Second, another leading influence is economic insecurity. Similar to gold, gemstones are perceived by some as a tangible store of value in tumultuous times. Lately, “dealers are increasingly being asked to put together entire collections for wealthy Americans who want to diversify away from paper investments”. The desire to possess a concrete symbol of affluence leads many to buy luxurious, costly products.
Lastly, a third factor is definitely supply shortages. Good quality colored-stones are difficult to find whatever the economic climate. The outfits digging for them are infinitesimal compared with the giant diamond corporations. Major producers, like Madagascar and Myanmar, are too entrenched in dysfunctional politics to engage in serious trade. With such losses, the Law of Supply says it all.
(Information taken from “Rubies in the Sky”, The Economist September 10th 2011)
I recently saw that gold had topped $1,800 an ounce but $1,900 is new to me. This number is crazy and begs the question of whether gold is actually a stabilizer when it comes to market forces. Recently, people who have become worried about the debts of European countries are flocking to gold and as you said precious gems and away from paper currency which in some countries is rapidly losing value. While I knew gold was increasing, I hadn’t really been following the market for gems and other related items and found your article very interesting. It also makes complete sense, as demand for these items increases the price and supply will rise. It’s basic economics.
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