Daniel Nyfeler: Technology for Colored Stones

Is the colored gemstone market’s growth structural or are we witnessing a “cyclical trend”? Is there a risk of a possible bubble?

In order to speak of a speculative bubble, two conditions must be met: an excessively fast growth in demand, and a production capacity that can rapidly increase supply. In the case of colored gemstones, the first condition may have been partially met, considering the fast-increasing interest in these stones. The second, however, does not apply. Unlike the diamond industry, which is dominated by a few large operators with industrial mines capable of producing enormous quantities of stones, the world of colored gemstones is fragmented and has limited production. There are a few major mining companies - such as Gemfields, Fura Gems, Belmont in Brazil for emeralds, and Grizzly in Zambia - but the number of large-scale mines is still small. The availability of high-quality material is therefore structurally extremely limited. This chronic undersupply of precious stones is one of the main reasons why prices for high-quality gems tend to remain stable and positive in the long term.

What are the main critical issues in the evaluation and classification of colored stones in terms of treatments, origin, standardization of quality parameters, and how much do they affect market transparency and confidence?

One of the reasons for the growing interest in colored gemstones lies in the difference in approach compared to diamonds. When consumers decide to enter the gemstone market, they immediately turn to diamonds because they are a relatively simple product to understand and relay. For decades, the industry has divulged the value of the stone and its perfection through a clear system: the four Cs: Carat, Color, Clarity, Cut. With these preconditions, it is difficult to go wrong when buying a diamond. The pricing structure is also relatively transparent thanks to tools such as Rapaport, which make the diamond acquisition process smooth and clear, even for those who know little about the industry. Colored stones, on the other hand, are much more complex. Each stone has different variables: type, treatments, geographical origin, color quality, inclusions. In some cases, such as rubies, sapphires, emeralds, or Paraiba tourmalines, even the origin can significantly influence the value, and this complexity is both a barrier for new buyers, and a strength. Unlike diamonds, in fact, they not only convey the perfection of the material, but also their individuality. Inclusions, for example, are not considered defects, but distinctive elements that tell the story of the stone past, formation and origin. This approach has never been adopted for diamonds, whose industry has always built its entire narrative around perfection, which has proved to be something of a boomerang in terms of the increase in synthetic diamonds, which are now able to replicate that very perfection in the laboratory. In the world of color, on the other hand, the stone’s story, origin and natural characteristics are a constantly fundamental and distinctive element able to satisfy very different requests and tastes. This explains why, when the first synthetic colored stone was released on the market about 100 years ago, it had very little impact on the color industry.

What factors will determine competitiveness: access to mines, supply chain control, gem trademarking, brand narrative, or design innovation? Where will the game really be played?

In recent years, sustainability and traceability have become increasingly important issues even for colored gemstones. However, the relevance of these aspects varies in accordance with the market segment. For extremely high-value stones — often purchased as an investment and perhaps destined to be kept in a safe — I believe that the main factors determining their purchase are the exceptional quality of the material and its origin rather than aspects related to ESG values. More attention is paid to elements that guarantee long-term value retention, and I don't mean 5 years, but 20, 30, 40... The case is different for “bread and butter” jewelry, sold in large quantities and intended for the end consumer. Here, sustainability can be an important factor in purchasing decisions, especially for younger generations, who are increasingly mindful of the social and environmental impact of the products they buy. New technological solutions for tracking gems along the supply chain have been developed to meet these needs. Gübelin, for example, in collaboration with a Swiss university, has developed a system that uses invisible nanoparticles inserted into the rough stone directly in the mine. These particles act as a kind of “birth certificate” and contain information about the origin and time of extraction. This system is used mainly by large companies, but also by smaller businesses such as Gerhard Hahn in Germany. Alongside this technology, we have also developed The Provenance Proof, a blockchain-based platform, which records and tracks every step of the stone's journey along the value chain, from the mine to the end consumer. The platform now has over 40 million registered gems and more than 700 participating companies, making it one of the largest digital communities in the colored gemstone industry. 

Which gems are experiencing the most interesting growth, and what factors are influencing demand, availability, and prices?

From a value perspective, it is hard to say which stone is experiencing the greatest growth, but in terms of market trends, the so-called “big three” - ruby, sapphire and emerald - have been increasing steadily in value for decades, especially when it comes to untreated, high-quality stones. But, as I said earlier, the question is mainly related to insufficient supply. Besides these three, however, some other gems are also attracting increasing attention. The extremely rare Paraiba tourmaline has a very limited but high-quality production from Brazil and a more stable production from Mozambique, also of high quality but with low volumes. Then there is red spinel from Myanmar, Tanzania or Vietnam, or highly coveted blue and cobalt spinel from Vietnam and Sri Lanka.