Despite Varied Expectations, It’s Business As Usual for Fancy Color At Auction

Current FCD market conditions are attributable to subdued spending from consistent FCD buyers, most notably Asian ultra-high-net-worth individuals (UHNWIs). The Chinese government’s recent anti-corruption policy has had an effect on the climate of the luxury market, as austere penalties have led to rising fears of extravagant spending – this affects the luxury market across all sectors. Until China regains its footing, the atmosphere in the luxury industry will remain tainted. The reform in China is expected to end in 6-8 months.

Additionally, economic sanctions imposed in Ukraine as a result of the escalating political unrest in the region have stifled the Ukrainian and Russian economies. With one-third of the world’s diamonds hailing from Russia, the conflict undoubtedly affects the diamond trade.[1]

Despite the Chinese and Russian disposition, FCDs remain high in demand. At last week’s auctions FCDs performed well, as there were several highly profitable sales. The Christie’s ‘Magnificent Jewels’ auction on 11 November in Geneva achieved the highest total ever for a jewelry auction, selling 89% of the lots and 94% by value for a total of $150.2 million.[2]

Jeweler Laurence Graff purchased the second top lot of the sale: a pair of Bulgari pear-shaped Fancy Vivid Blue SI2 and Fancy Vivid Pink VS2 diamond ear pendants (Christie’s, Lot 392), which sold for $1,151,436 price per carat. The two 6.95 ct and 6.79 ct colored diamonds are suspended from pear-shaped and marquise diamond clusters.

According to The Fancy Color Diamond Index, Fancy Vivid Pink diamonds in the 5-7 ct range have appreciated in value 372.5% over the last decade; Fancy Vivid Blues in the same size range have appreciated 153.8%.

The final price was a touch above what a wholesaler might pay, indicative of a strategic move by Graff.  A small black crystal is located on the pavilion of the Fancy Vivid Blue diamond, which Graff can easily remove by re-cutting the stone to an SI1 or VS2 whilst maintaining the weight over 6 cts. Private collectors would typically pay more for a Bulgari piece, but the clarity grades may have detracted buyers. Even though the two diamonds are rare because of their size, their color quality is average. The Fancy Vivid Pink has a subtle orange undertone[3], yet still exudes an attractive look. The Fancy Vivid Blue diamond has a slight touch of grey but an overall pleasing aesthetic.

Sotheby’s November 12^th auction in Geneva sold an old mine cushion-cut Fancy Intense Blue diamond weighing 3.16 cts (Sotheby’s, Lot 460) for $1,010,804 price per carat. The blue diamond has a relatively low inner grade[4] for a Fancy Intense, as well as low color dispersion[5]. However, the stone managed to attain a higher price than what a retailer might pay – based on the price per carat, it was likely purchased by an end consumer.

Several pieces by jewelry designer JAR sold as much as 10 times the amount of their estimated price as Mr. Joel Arthur Rosenthal himself sat in the audience during the sale.  A very large gold, diamond and green garnet bangle (Christie’s, Lot 305) sold for an unexpected $3,649,493, an astonishing price when its $301,767 high estimate is considered.

Given that the outlook for the fancy color diamond industry is inherently linked to consumer demand, we see a positive long-term performance for fancy color diamonds in the market place.

[1]Hedda Schupak, “What the Ukraine crisis means for gold, diamonds and the U.S. economy,” rubel-menasche.com, (March 5^th, 2014).

[2]Natalie Bos, “Results: Gems & JAR Jewels Sparkle at Christie’s Geneva Magnificent Jewels,” jewelsdujour.com, (November 12^th, 2014).

[3] Undertone: the presence of a unique tint in a color.

[4] Inner grade: the color strength range within each saturation level.

[5] Color dispersion: the uniformity of color distribution within the ‘Even’ grade.