Header Ad

Supply & Demand

However, all the talk about the four "C"s ignores the fact that these gems are traded in a free market where supply and demand rules supreme.  The huge variation in gemstone value are of course based on the classic quality factors but are also influenced greatly by market factors.  The complication is that these markets do not always behave as the economic textbooks say they should.

SUPPLY AND DEMAND
All other things being equal, gems that are very rare should be priced at much higher values than ones that are very common.  This is generally true.  Of course, the diamond market is a classic example of how this is not totally accurate as the very strict marketing and control of supply creates a higher price than it would otherwise be.  The value of diamond would indicate that this gem is very rare - in fact, there are a number of gemstones that are much rarer including good sapphire.

The other side of the equation is demand.  Effective marketing campaigns can create demand and increase price.  Again, diamond is another classic example of this where the De Beers campaign "a diamond is forever" has created a perception that diamonds are the automatic choice for an engagement ring.  Diamond prices are much higher than for other gems of similar relative rarity due to strong and effective marketing and control of supply.  On the other hand, if the supply of a particular gem is so small that it is difficult to create and maintain demand, price for that gem may be lower than the rarity of that gem would indicate.

Another interesting fact is that exactly the same stone can have a very different market value in different countries simply because of different market conditions applying. For this reason, market appraisals or valuations can also be very different as the valuer must give their opinion according to the relevant market.  These differences have become even more apparent with the development of online sellers like ourselves. 

Previously gems were divided into precious gems (diamonds, rubies, emeralds, sapphires) and "semi-precious stones" (everything else). This division is no longer considered useful as there are many rare and valuable gems in the “semi-precious” family. 

SUPPLY CHAIN AND MARKUP FACTOR
Another point that is often overlooked!  The typical chain of supply from the miner to the retail buyer is much longer then most would realise.  From our experience most sapphire changes hands at least six times (or even more) in this supply chain.  Each time this happens, a markup occurs in the price of the gem.  This is simply how each person in the supply chain gets paid for their services. As the sapphire or other gem goes higher up the supply chain, the level of markup also increases.

This explains why you may see a particular item on a site like ours and be concerned that it is too cheap so therefore may not be as good as the more expensive product.  The reason for this is simple - our gems have only been sold once, not many times. 

While we do not suggest that you search for the cheapest option, do not believe that the most expensive one must be the best.  We have seen many sapphires in particular sold at unbelievable prices for the quality of the gem - some sellers with big reputations may sell quite ordinary gems due to their market position, other high end vendors deal in only the very best gems.  Your challenge as a buyer is to identify who is offering quality gems with good value.

In summary, supply and demand is the primary influencing factor on gemstone price generally while the four “C”s affect the actual value of a particular gem. Often buy buying just under price jumps for size can save serious Dollars,for example a good 6mm/1ct  round may sell for $375 and up,the same in 5.5mm/.75ct $225 and up. 

Go back to the Grading and Pricing page.