GemNews

Appraisal Values, Updates and the Strong Dollar

Posted by Anne Neumann - 26/08/08 at 07:08:07 am

We have all been taught at our Mother’s knee that prices for consumer goods and services always go up.  It is one of the basic tenents of consumerism.  The problem with that of course is that in many cases it is simply not true.  TV’s, computers, cell phones, flights to the Caribbean, houses in US subdivisions all are much cheaper now than in times past.  Some of the reasons are technological, some of the reasons are over-supply and some of the reasons are market-driven.  The same is true of jewellery.

All the components from which jewellery is made such as gold, diamonds, platinum, and gemstones are bought and sold in US funds.  In the early part of this decade the Canadian dollar was very weak relative to the US.  Do you remember paying $1.60 Canadian to get $1.00 US?  How much does it cost now: par, subpar, $1.06?  There is a big difference.

This exchange rate differential has a profound effect on the US goods and goods priced in US funds that we buy.  Have you been to Chapters for a novel lately?  They are charging less than the US price for most books. The same is true of jewellery prices.  The prices of most gem-set items have fallen sharply because the component prices have come down because the stronger Canadian dollar can buy more than it once did. Items made primarily of precious metals are the exception to this because of the commodity price run-up as the American economy weakens.

A second factor in the downward pressure in the cost of jewellery items is the long-sought repealing of the jewellery excise tax in 2006 which was introduced as a temporary tax during the First World War.  This tax was applied at the wholesale level and the reapeal of it has lowered the cost of jewellery as well.

What does all this mean to an appraiser or an appraisal customer?   An appraisal of an item of jewellery for purposes of insurance reflects the estimated cost to replace the item on the date of the appraisal in the geographical area where the appraisal is prepared.  The appraisal of a recently acquired item reflects the new costs of replacement.  An up-date of previous appraisals reflects the CURRENT cost of replacement.  A value from 2001 or 2002 reflects the cost to replace then, NOT NOW.  The state of the market, the cost of the dollar, the repeal of the tax have all had a tremendous effect on the cost of jewellery.  These factors are taken into account when appraisals are updated.

For an example: an item of jewellery, appraised in 2001 when the US dollar cost 1.60 Canadian and when the excise tax was in force, was valued at $10,000.00.  The same item, priced today at par, is valued at $6,300.00.  To look at it another way. An item priced at $5,000.00US in 2001 would be $8,800.00 Canadian.  Today, at par, a $5,000.00US item is $5,000.00 Canadian.

That’s the effect of currency.  What does it really mean to you?  Well, if you are paying insurance premiums on 2001 or 2002 values, you are paying too much.  An update is clearly in order.

Big is beautiful, but is size everything?

Posted by Duncan Parker - 22/08/08 at 08:08:39 am

There has always been a mystique about gems, and we all find these beautiful items interesting and compelling. There are several factors that influence the value and desirability of a gem. Beauty is paramount, and to be desirable, a gem has to be beautiful. There are factors that constitute beauty.

Colour is very important in many gems. Attractive colour is important in gems. Sometimes fashion will dictate colours that are more desirable. Orange is going to be very popular this season, and some orange garnets or citrines will be good accent gems in the orange range. Other colours are timeless, red, blue and green as seen in ruby, sapphire, and emerald, and many other gems for example, remain popular.

Lack of colour can also make a gem desirable. Diamonds are valued for their lack of colour. “D” colour diamonds are entirely colourless and are very rare, and are the most precious of colourless range diamonds (all other things being equal).

Cut will make a gem sparkle and sing. A gem that is beautifully cut will show its colour to the best effect, and its greatest brilliance.

Clarity is important, because colour will look best when it is seen transmitting through a transparent gem, showing so many nuances of colour as light passes through different parts of a gem. Clarity can also influence the benefits of good cut. If a gem is translucent to opaque, it doesn’t matter how well cut it is, because the light can barely pass through it anyway.

Type of gem can influence desirability and therefore value. If the gem is rare, it is likely to have greater value than an equivalent looking gem that is of a very common material. Blue topaz is widely available, and is far more modestly priced than the rarer gem aquamarine.

Now: Size: If you have a gem of very good to exceptional quality in terms of colour, clarity, cut grade, and in gem type, then the remaining factor of size (or carat weight in most cases) can be a very important element of value. A very fine diamond, a ruby, or an exceptional alexandrite, of fine colour, clarity, and cut and of 30 carats, for example is excepionally rare and will be incredibly precious.

The larger the carat weight of a fine gem, the higher the value of that gem. However: If a gem lacks attractive colour, clarity and cut, but is just big, then size alone doesn’t make it valuable.

So, someone offers you a 500 carat topaz, or a 1000 carat sapphire, it is big, but is it worth anything?

We recently saw a 3000 carat opaque sapphire in this laboratory, The sapphire was blue, but had an unattractive grey tone to the blue. The gem was entirely opaque, and really was unattractive. The stone was worth very little, but the client thought it must be worth millions of dollars purely due to size.

We also recently saw a 1,500 carat topaz that was of rich colour, was very transparent, and was well cut, but was cut from material that is readily available in similar colour, clarity, cut and size. was the gem worth a fortune? no. This is for a different reason. gems like this are simply available in whatever size you want, and and as many as you like, so size here is of little importance.

Big may be beautiful, but often isn’t even that, it isn’t something that you want to invest your hard earned money in unless you know a lot more about it than just the size.

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