Wealthy consumers invest in jewelry amid rising uncertainty, market volatility

When the gavel came down in December, Christie’s had set a record that created excitement in the auction world.

A Tiffany & Co. decorated with necklace sparkling blue Paraiba tourmaline stone and the diamonds sold for over $4.2 million, 10 times the low estimate. A matching pair of earrings later hit the block, too, selling for 10 times its estimate.

“I think this is really an indication of how far private clients are willing to go for these extraordinary items,” said Jacqueline DiSante, vice president and head of sales for Christie’s New York jewelry division.

Amid economic and geopolitical uncertainty, a certain class of consumers is turning to an unexpected asset class: jewelry. The trend comes as investors increasingly flock to tangible assets. For ultra-wealthy consumers, colored gemstones such as rubies, sapphires and emeralds are particularly popular right now.

“When there is macroeconomic volatility… the attractiveness of tangible asset investment increases,” said Thorne Perkin, president of investment management firm Papamarkou Wellner Perkin. “Tangible assets tend to maintain their value and even increase when inflation rises.”

Mario Ortelli, managing partner of strategic partner and M&A advisor Ortelli&Co., agreed with Perkin, saying the trend clearly has a “defensive element.”

“During times of inflation, geopolitical tension or volatility in financial markets, tangible assets become more attractive,” he said in an email. “Branded jewelry can serve as a portable store of value.”

“Unlike fashion accessories that are tied to seasonal cycles, the product life cycle of iconic jewelery collections is much longer,” he added. “In many cases, they also exhibit stronger resale value dynamics than handbags. This longevity and perceived capital preservation help explain the relative durability of jewelry versus soft luxury.”

Luca Solca, Bernstein’s global head of luxury goods, estimated that roughly a third of the renewed interest in gold-heavy and precious stone jewelry could be attributed to “flight to safety” behavior for investors.

Strong resale value

It played a role in increasing gold prices. Long seen as a safe-haven asset, gold rose to its highest price ever in January, above $5,100 per ounce. Although prices have since retreated, they are still trading high above $4,500 per ounce.

“I think the view of jewelery – gold jewellery, diamond and gemstone jewelery – as an investment is being strengthened by the almost daily increase in the price of gold,” said Andrew Brown, founder and CEO of luxury resale platform MyGemma.

Christie’s DiSante said record-high gold prices are encouraging some collectors to get out of carpentry and sell certain pieces.

Experts say the jewelry’s durability in the resale market is part of its appeal. Brown said she regularly sees customers reselling branded jewelry years after their original purchase, often at much better prices than designer bags, indicating they are much easier to wear from use.

Jewelry has managed to overcome softness in the luxury market and has been growing “pretty nicely” over the past two years, according to Caroline Reyl, senior investment manager of Pictet’s premium brands strategy.

Reyl said he sees consumers moving away from “soft luxury” products like bags and accessories. At the same time, “hard luxury” products such as watches and fine jewelry have also increased in popularity. Reyl attributed the change to steep price increases for bags due to previously strong demand and supply chain disruptions.

Quality concerns also have a negative impact, Brown said.

A Bernstein study found that auction prices for Hermès’ iconic bags have fallen, with average resale premiums for Birkin and Kelly bags dropping from 2.2x in 2022 to 1.4x last November.

“Leather doesn’t have a lot of inherent value,” said Ankur Daga, founder and CEO of fine jewelry e-commerce company Angara. “As gold gains value, people increasingly realize that it is a very valuable asset.”

Durability is the key to jewelry, especially Cartier, Van Cleef & Arpels, Tiffany & Co. and helped strengthen the reputation of pieces from well-known brands such as Bulgari as a long-term store of value. Brown estimated that these four brands account for about 90% of MyGemma’s jewelry sales.

A ‘passion investment’

There is also an emotional element to jewelry. Perkin described it as a “passion investment” where consumers are potentially drawn to a “prestige element.”

Ortelli agreed. He said that the element of brand value, craftsmanship and scarcity strengthens the perception of durability and value retention.

“Branded jewelry has historically experienced mid- to high-single-digit annual price increases over the long term, depending on the brand and design,” Ortelli said. “Since resale usually occurs at a moderate discount to the current retail price, over a 5-10 year period owners can often exit above their original purchase price.”

‘Color is fashion’

Ortelli said gold-heavy jewelry benefits from a price floor created by the true value of the metal. “But exceptional gemstones – especially rare, high-quality sapphires, rubies or emeralds – can command significant collector premiums,” he said.

Fashion trends currently favor colored gemstones, which have emerged as one of the fastest growing jewelery segments.

This is especially true in Asian markets, said Lucrezia Buccellati, jewelry designer and creative director of Italian jewelry house Buccellati. He explained that colored stones allow for more creative designs and often appeal to buyers who want more distinctive and personal pieces.

Consumers may also be looking for alternatives to diamonds.

Angara’s Daga said there is “a real shortage of gem-quality material coming out of the earth.” He explained that colored gems are more difficult to replicate in the laboratory. Unlike diamonds, the stone’s inclusions, or minerals trapped inside during its formation, provide the character of a colored gemstone and increase its value.

“None of them are exactly alike, and I think that’s what makes them so interesting for today’s market,” DiSante said, likening each one to a work of art. he said. “In a world where we see lab-grown diamonds being made and it feels like a conveyor belt, you can’t do that with a sapphire or a ruby ​​or an emerald.”

Daga said he expects colored gemstones to appreciate faster than gold.

“If you look at Sotheby’s and Christie’s auctions, you will see that these precious stones are trading at prices that no one could have imagined five years ago, and this figure is only going to increase,” he said. “Color is fashion.”

Colored gemstones are trading at auction houses for two to three times higher estimates, which is “very unusual” given that auction houses generally calibrate low and high bids relatively well, Daga said.

As a testament to the strength of the trend, Daga estimated that about 15% of engagement rings today feature a colored gemstone; this rate was 5% ten years ago. Perhaps they have become even more popular thanks to celebrities such as Kate Middleton, Eva Longoria, Halle Berry, Rita Ora and Halsey.

This trend also brought in young consumers. By 2025, Millennials and Generation Z will make up 44% of Christie’s luxury buyers, DiSante said.

If macro uncertainty continues, experts like Reyl said they expect jewelry investments to continue. Buccellati agrees, saying he expects high-luxury jewelry to continue to grow and outpace soft luxury products.

However, there are also some challenges such as lack of liquidity, security concerns and storage costs. Unlike stocks or real estate, jewelry does not provide income to its owners.

“Jewelry should not be viewed as a financial asset equivalent to stocks or ETFs; the liquidity, transaction costs and dispersion of returns are much higher,” Ortelli said.

He added that the long-term outlook for branded luxury jewelery is positive but cyclical.

“This category performs best in supportive macroeconomic environments with increased wealth creation and political stability. … In the event of a severe macroeconomic downturn, demand will contract,” he wrote.

This is where some collectors may find solace in the more sentimental aspects of jewelry.

“I think there’s something really romantic about a colored stone,” DiSante said. “There’s something really incredible when you think about it being formed on Earth hundreds of thousands of years ago. And if it’s a Kashmir sapphire – that mineral was only mined for 20 years in the early 1900s – there’s a certain romance behind it that you can’t replicate.”

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