Gemstones a handy asset for investors

Unset gems are attractive to a wider market. Source: Getty Images

THERE'S nothing like a bit of bling to put a sparkle in the eye and a hefty dent in the savings account.

However, gemstones can be an investor's best friend.

Precious stones have been an investment of choice since man first dug them out of the earth's crust, rivalling gold as international currency.

Unlike most gold, not all gems are created equal and, believe it or not, fashion and politics are big factors in the world of investing in gems.

Precious stones and gems rise and fall in popularity depending on politics, war, science and supply and demand.

Australian-based Gem Hunters says stones currently on a rapid rise in price include sapphires, tanzanite, emeralds, coloured diamonds and rubies.

For first-time investors, blue sapphire is probably the safest bet, Gem Hunters founder Trudy McKenzie says.

> Rising star

"Blue sapphire is always the best world seller and its value is rising rapidly every couple of months," McKenzie says.

"What is forcing blue sapphire prices up is the difficulty in obtaining them. Pakistan and Afghanistan have very good blue sapphire; the Taliban control a lot of it."

Although Africa and Australia are also good sources of sapphire, the supply chain in Africa is undergoing a structural change, while in Australia the Queensland floods during the past four years have affected production.

At the same time, there is a hungry new buyer pushing up prices even more.

"China has decided it wants all blue sapphire, rough and cut, and it will pay high prices," McKenzie says.

Natural sapphires are also more desirable, particularly as there are a lot of colour-enhanced sapphires flooding the market treated with beryllium. To test a sapphire for beryllium is expensive, so to avoid buying a treated stone the price for natural sapphires has also grown.

> When and how to buy

"The strong Australian dollar makes it great timing to buy any commodity based on US dollars, and gems and diamonds are always priced in US dollars."

> Investment returns

According to McKenzie, buying the biggest and best quality stone you can afford will provide the best investment return.

"If you want to be an active trader you could start as small as $50, buy some cheap small affordable gems to re-sell for a quick turnover, such as small sapphire. Your profit could be about $200, which would give you funds to buy a more desirable gem size," she says.

"Generally jewellery is not as good. Once the gem is set, the next buyer must like the setting - and jewellery is a very individual taste."

> Unset gems are attractive to a wider market.

Djeva says different cuts also appreciate at different rates. Round brilliant cut gems are the most expensive and most popular because there is a wider market. Princess cut is the second most popular, followed by oval.

"During the past few years, pink diamonds have doubled in price, while white diamonds are up about 25 per cent. However, if the Australian dollar drops back to about 80 US cents ... then the gains over the past few years will be multiplied," Djeva says.

+ WHAT TO BUY

> CLASSIC INVESTMENTS
* White diamond
* Emerald
* Ruby
* Sapphire
* Coloured diamond

> RISING RETURNS
* Tourmaline
* Green garnet
* Spinel

> TYPES OF CUT

* Round brilliant
* Princess
* Oval
* Tear drop (pear)

Source: Gem Hunters, Australian Diamond Brokers, Gemstones for Dummies

Gems Inverstors: www.gemsinvestors.com