Fine Jewelry as an Investment: A Review (2020-2022)

Fine Jewelry as an Investment: A Review (2020-2022)
A 'Tutti Frutti' Gem Set and Diamond Bracelet Watch, Source - Southeby's

Amid heightened economic uncertainty and inflation, UHNWIs have turned to classical stores of value: fine watches and jewelry. Boasting low volatility and consistent returns, these tangible assets serve a myriad of functions, from reflecting social status to symbolizing landmark moments in life.

Jewelry and Watches amid the COVID-19 Pandemic

While the jewelry and watch industry faced challenges, such as supply shortages due to mine closures, it's interesting to note the emergence of trends like an enhanced sustainability focus, increasing Asian demand, and digitalization. The origin continues to be a pivotal price factor with Kashmir sapphires, Burmese rubies, and Colombian emeralds commanding premiums.

Diamond Dynamics

The diamond market has seen a price surge due to various factors, including production and logistical challenges post-pandemic. Fancy colored diamonds, especially pink diamonds, have experienced substantial appreciation, largely attributed to the closure of the Argyle mine.

Auctions have reflected the market sentiment. Highlights include “The Sakura” diamond sold for USD 29.3 million and “The Spirit of the Rose” fetching USD 26.6 million. Further, “The Key 10138”, a 101.38-carat diamond, was auctioned for a remarkable USD 12.3 million, marking a 32% increase in value from its counterparts the previous year. Other remarkable pieces include “The Enigma” which went for USD 4.3 million and “De Beers Cullinan Blue” that set a benchmark with USD 57.5 million. The growing allure of colored diamonds is further evidenced by “The Red Cross Diamond”, a 205.07-carat yellow diamond, fetching USD 14.3 million.

The Asian Influence

Asian markets, driven by China and India, account for approximately half of all branded fine jewelry and watch sales. Factors driving growth include a rising middle class, increased branded retailers, and high import duties making domestic purchases more attractive. Auction trends indicate a 78% surge in sales of top-tier stones in Hong Kong SAR and New York over the past three years. Duty-free zones, such as Hainan, witnessed an 84% sales boost in 2021, achieving sales of USD 7.9 billion.

The Power of Branding

Notable brands like Van Cleef & Arpels, Cartier, and Bulgari continue to enjoy success, especially at auctions, due to their iconic designs and historical significance. The “Mystery-Set” jewels by Van Cleef & Arpels amassed USD 54.97 million in December 2021. Cartier's “Tutti-Frutti” bracelet fetched USD 1.34 million, and the legendary Elizabeth Taylor's collection made a staggering USD 116 million in 2011. However, the mid-market level faces challenges as domestic fine jewelry in China is predominantly unbranded, providing room for growth or decline against international competitors.

Adapting to the Digital Age

Brands are increasingly leveraging technology to enhance customer experience. Innovations range from augmented reality allowing customers to virtually "try on" jewelry to leveraging blockchain for diamond authentication.

Auction houses like Christie's and Sotheby’s are capitalizing on digital platforms, witnessing a surge in online sales. With Christie's experiencing a 143% increase and Sotheby’s reporting 92% of its 2020 lots procured online, the shift towards digital is clear. An interesting observation is the involvement of younger demographics; 45% of online buyers in 2022 were below 40.

Cryptocurrency acceptance in auctions is an emerging trend, appealing to a newer generation of buyers. Notably, “The Enigma” was purchased using cryptocurrency.

Conclusion

The past three years have confirmed that fine jewelry remains a resilient and lucrative investment avenue. Driven by their multifunctionality, cultural significance, and the sense of tangible luxury they offer, fine watches and jewelry have been and will continue to be a prized possession in the portfolios of the affluent. As the market continues to evolve, so will the strategies of brands and investors. Whether it's leveraging technology, tapping into new markets, or emphasizing sustainability, the future of the industry looks as radiant as the gems it celebrates.

Sources

Collectibles amid heightened uncertainty and inflation | Deloitte Luxembourg | Art & Finance
This initial report aims to provide an overview of some of the most popular collectible assets fueling investors’ imaginations over the years.

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