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Monday, January 6, 2014

Investing in precious gems

By Richard Craft

Gemology is the practice of identifying and evaluating gemstones, and it has become very popular among investors. Gemstones carry a certain mystique and can be a great investment, but they clearly aren't for everybody. Some would equate collecting and investing in precious gems to investing in art; some gems may become incredibly valuable and make an investor a handsome profit, while others should only be purchased because they look nice in a collection. Still, precious gems can make investors a significant profit, but only if they have sufficient risk capital and risk tolerance to make the gamble worth their while.

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A major risk

Investing in precious gems is attractive to investors, if only because of the aura of mystique surrounding the stones. Novice investors need to be aware of how much risk these investments can carry. Although many gemstones have appreciated in value significantly over the years, there are still several ways to lose capital when investing in the precious gem market. Fraud, political risks, and the potential for stones to be damaged when they are cut are just some of the problems that precious gem investors face. On the other hand, significant gains can be made when an investor manages to purchase a large uncut stone, cuts it, and sells it for a profit.

Traditionally, precious gem investing has come from very exclusive circles made up of a handful of families in Holland, Belgium, New York, Israel, Africa, and India, among others. Most buying and selling of gemstones occur between these families, but a few of them have gone outside of their own circles and reach out to other investors. More stones are being found than ever before, and long-time investors have had to do business with new financiers out of necessity.

Gem investment basics

Those who have enough risk capital and who want to get involved in the world of gem investment need to know some important facts. First of all, although there are thousands of precious stones, the stones that are regularly traded are limited to rubies, emeralds, sapphires, and diamonds. These gems are valued according to several characteristics, and they are considered to be more valuable if they have a perfect combination of the most desirable characteristics.
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The first characteristic that investors look for in a gemstone is its size. Larger gems are typically more valuable, and even a small difference in size can affect a gem's value. The next major characteristic is the gemstone's grade. Grade refers to the purity of a stone and the likelihood of it cleaving (or breaking). Purer stones have fewer flaws and are less likely to cleave when they are cut.

Color has also always been important in the value of a gemstone, but colored stones have seen significant appreciation of value in recent years. For example, colored diamonds have become very popular in North American markets. In fact, colored diamonds are now considered to be among the most valuable luxury items in the world.

Although there is plenty of risk involved when investing in gemstones, the potential for returns can be very high. It is as close to gambling as investing can get, so if you plan to enter into this market, make sure that you have plenty of risk capital and are working under the guidance of trusted and reputable professionals.

About the author: This article was written by Richard Craft, a regular contributor of Moneycation. He recommends checking out the expert jewelers at Dickinson by Design if you're looking for great jewelry. Check out their website today and see what they have!