TABLE OF CONTENTS

TUCSON GEM SHOW '99

By Robert Genis

The Tucson Gem Show keeps growing every year. In 1999, there were about 4,000 exhibitors at 27 shows, up from 20 in 1998. The shows lasted 15 days. It is estimated 33,000 people from around the world and 10,000 Tucsonans were in attendance. As usual, the 14,000+ rooms were packed with visitors and exhibitors who spent over $15 million while in Tucson. The three main shows for higher quality gems remain the AGTA, GJX, and the GLDA. Unlike last year, there were no buyers waiting in line to get passes and the aisles were not three to four deep with buyers with large checks in hand. The AGTA show seemed the most serene. Part of this is due to the fact the Community Center is so large, if it is not packed with buyers, it appears deathly quiet. GJX in the tent has a better chemistry, narrower aisles and appears crowded. The GLDA exhibit has almost a bazaar atmosphere.

The consensus among dealers was sales were about the same as last year. Some dealers stated they had increased sales and some dealers reported declining sales by about 30%, but these were the exceptions. Dealers with declining sales put the blame on decreased traffic due to the Orlando and the JA-New York shows.

Here is a gem by gem analysis of the stones we monitor:

Burma Ruby
I met extensively with the few major dealers of unheated Burma Mogok rubies. The conventional wisdom is that these goods are up in price. Dealer estimates of price appreciation range from a low of 20% to a high of 100%! The dealers who were recently in Burma stated the goods were up but there would be a lag before the new prices hit the rest of the world. They stated it was impossible to replace their inventory at current prices. Of course, it takes time for the current world inventory stocks to be purchased at the lower prices before dealers are forced to buy at the new price levels.

Some nice, carat sized, unheated, Burma Mogok reds from $4,000+ per carat and up were evident. What I did not see were any two carat or above fine reds. I saw a few two caraters, but they were pink and wholesale was $4000 per carat. I didn't see any star rubies of interest.

Similar to `98, the amount of heated/fracture-filled Mong Hsu Burma rubies was way down from the heyday of the past few years. I suspect the supply is down and the gem is out of favor except in low quality jewelry.

The collector market has always sought unheated Mogok Burma ruby and the trend in the jewelry market is turning towards unheated natural material. We saw many retailers asking for this material for the first time ever. This demand must be top driven by informed consumers. I also noticed many were shocked at the prices of these goods. Most jewelers are used to buying commercial qualities of heated Thai rubies for $1000 per carat. When one retailer jeweler balked at a red Mogok Burma ruby for $4000 per carat, the dealer said, "If they want to play, they have to pay!"

Our advice remains the same: Load up on these rare and desirable goods.

Sapphires
The selection of Kashmir sapphires was nil and unheated Burma blue sapphire was sparse. The supply problem of Mogok Burma ruby is exactly the same for the Burma sapphire market. The big news in the sapphire market was the Madagascar blues. These stones look similar to Sri Lankan goods and are available for approximately a 50% discount. Besides blues, Africa is also producing various shades of colors, such as pink and yellow.

Emeralds
The Tucson Gem Show was littered with many Colombian and American emerald dealers. I noticed these booths were the least visited by the attendees. Although this market is weak, it appears it has at least stabilized.

Spinel
Three of the main dealers of Burma and Viet Nam spinel were not at the show. We do not know if this was because they had no goods or were at the Orlando or New York shows. The availability trend of all Viet Nam goods (ruby, sapphire, and spinel) was down. I did not find a single color change or raspberry spinel at the show. There was ample production of African and Sri Lankan spinel, but most is not worth collecting.

Tanzanite
Tanzanite was in demand as many retailers and dealers tried to find goods priced below the market. Tanzanite has increased dramatically due to the catastrophic floods in Tanzania. Prices are up from 20-50% and the dealers who cost averaged their old goods with the new production sold the most tanzanite.

Tsavorite
There is more tsavorite on the market and 2 caraters can be found for between $900 and $1200 per carat, or about 1/2 of last year. However, the goods are too yellow or too dark compared to the old Kenyan colors worshipped by collectors.

Mandarin Orange Garnet
I met with Alan Roup of G.E.M. Namibia regarding the Mandarin orange garnet market. He has recovered from his heart attack and his mine is operational again. Prices are up about 30%. His main business is 2, 3, and 4mm sizes and any Mandarin over one carat remains large and should be collected. His market used to be the Far East, but with the economic slowdown in this area, the Germans are now the main buyers of the goods.

Red Tourmaline
The new Nigerian red tourmaline was a big hit in Tucson. The reds, cranberries, and purples sold better than the peach colors and oranges.

Canadian Diamonds
Rough and cut Canadian diamonds mined at BHP's Ekati mine were seen at the show. A polar bear is lasered on the diamonds' girdles. Regretfully, these Canadian diamonds are priced comparably to diamonds from other world sources.

Synthetic Colored Diamonds
Russian Colored Stone Company introduced synthetic colored diamonds in new red, pink, blue, and color change colors at the show. By the time I got to their booth the trays of blues and pinks were gone and only a few reds remained. The reds were darkish and all the goods were small. However, you can expect these goods to get larger and exhibit better colors as they continue to experiment. The goods will soon be laser inscribed by the GIA so the diamonds can be easily identified as synthetic. The diamonds will also be marketed with GIA reports stating the stones are synthetic.

New Gems
New gems introduced at the show were grape and raspberry garnets from Africa. Some of these stones are beautiful. Watch out for dark tones. Also, there were new (blue to red) color change garnets from Madagascar. However, most of the garnets we saw were darkish in tone. The blue side of the garnet looks like a blue spinel and the color change is dramatic. Finally, a new cat's-eye opal was displayed.

Labs Meet
Representatives from AGL, EGL, GIA, Gubelin and SSEF met to discuss their policies regarding treatments, especially emeralds. The labs all agreed to try to get along better and share research. Dealers at the seminar pressed the GIA about when their research study regarding the durability of emerald treatments would be complete. The GIA basically said it will be finished when it is finished. Do not expect the emerald market to rebound until this research is completed.

Summary
The gemstone market can best be described as vibrant and growing. There was no dumping of goods at Tucson. The presence of international buyers was in dispute, but international buyers are less of a factor in the gemstone markets. A dealer said, "America is insulated from the international economy and the US gem market is strong, thank you very much." Although the US economic expansion is in unfamiliar territory by its length, as long as consumer confidence and the stock market remain high, you can expect the gem market to tag along for the ride.

BOOK REVIEWS

The National Gem Collection

By Jeffrey Post
Photographs by Chip Clark

The world's greatest gem collection resides at the Smithsonian Institute's National Museum of Natural History. If you cannot attend, owning this publication is the next best thing to being there.

Intro
James Smithson, an Englishman, left his fortune in 1829 to the US government to establish the Smithsonian Institute along with 10,000 mineral specimens. His collection was destroyed in a fire in 1865. The collection grew slowly until 1958 when Harry Winston gave the Hope Diamond to the Smithsonian. Suddenly major gifts of special gems were donated to the museum. Today, the museum has over 10,000 gems and continues to grow.

Famous Gems
Hope Diamond
Although the Forecaster has written extensively on the Hope Diamond, what is fascinating about this book is it includes a personal photograph of Evalyn Walsh McLean (the last owner) wearing the blue diamond. Plus, it shows the Hope fluorescing a vibrant orange-red under ultraviolet light. It looks similar to a Burma ruby.

The Napoleon Diamond Necklace
The necklace was a gift from Napoleon to his second wife in celebration of the birth of their son. The diamonds weigh 263 carats. Under ultraviolet, the diamonds fluoresce blue, yellow, and orange. The necklace has a colorful past. In 1929, the Archduchess Marie Therese sent it to New York to be sold. An unscrupulous dealer sent her only $16,000. After numerous lawsuits, it was eventually returned. Marjorie Merriweather Post donated the necklace to the Smithsonian in 1962.

The Marie-Louise Diadem
Commissioned in 1810 by Napoleon on his marriage to Marie-Louise, the diadem originally was set with diamonds and emeralds. Regretfully, Van Cleef and Arpels removed the emeralds and sold them individually and replaced the emeralds with Persian turquoise, but left the diamonds.

The Marie-Antoinette Earrings
These earrings were Marie-Antoinette's favorite jewelry and she wore them constantly. The pear shaped stones are 20.34 and 14.25, respectively.

The Spanish Inquisition Necklace
The origin of this necklace is unclear except it was known to have been the property of Spanish royalty. It consists of 374 diamonds and 15 Colombian emeralds. The largest Colombian emerald is approximately 45 carats.

The Portuguese Diamond
The largest diamond in the collection is the 127.01 octagon Portuguese Diamond. The stone fluoresces strong blue. No one has ever been able to trace the stone's true history.

In 1928, Peggy Joyce, the ultimate glamor girl of the Roaring 20's, traded a $350,000 pearl necklace and $23,000 in cash for the stone. She mounted it in a platinum choker. She was a Ziegfeld Follies dancer and had six husbands and claimed to have been engaged 50 times! She sold the stone to Harry Winston in 1951.

Hooker Emerald
The Ottoman Empire owned this stone until 1900. It is a beautiful 75.57 emerald. The stone was featured in Tiffany's 1950 Christmas Catalog. Mrs. Janet Annenberg Hooker bought the stone in 1955 from Tiffany's and donated it to the museum in 1977.

Other Gems
Colored Diamonds
The National Gem Collection includes some of the finest natural colored diamonds in the world. Besides the Hope, they also possess the 30.82 Blue Heart Diamond. This diamond is probably South African and was purchased by Pierre Cartier in 1910 and sold to a wealthy Argentinean. Van Cleef and Arpels acquired the stone in 1953 and sold it to a German baron. Harry Winston purchased the stone in 1959 and sold it to Marjorie Merriweather Post, who donated it in 1964.

The Collection also owns the 67.89, yellow brown, pear shape, Victoria-Transvaal diamond. It was found in 1951 and starred in the movie "Tarzan's Savage Fury" in 1952.

Other interesting colored diamonds include two natural uncut greens, a 2.86 intense pink from Africa, and a 5.03 red that looks like a garnet.

Corundum
This section has a good discussion of country of origin and treatments. Take a look at the photograph of the 31 cushion shaped Burma rubies totaling 60 carats vs. the pictures of the Thai rubies.

Emerald
The book has some very interesting emeralds: the 858 carat, uncut Gachala Emerald from Colombia found in 1967, the 21.04 Colombian emerald, once worn by Mexico's Emperor Maximilian, the relatively clean Chalk emerald (it looks like a 4/85, AGL), and the Art Deco diamond and platinum necklace from Cartier with the 168 carat Mackay emerald from Muzo, Colombia. Also, check out the red beryl from Utah.

Other Important Gems
Some of the more unusual specimens at the Smithsonian include the over 106 pound quartz sphere, the 7500 carat faceted quartz egg, the 22,892 golden topaz, the football shaped 7,033 blue topaz, and the 12,555 golden topaz sphere cut in Idar-Oberstein, Germany.

Garnet
This book does an excellent job with the many colors of garnet. Do not forget to view the red garnet hairpin from the Czech Republic, the tsavorite necklace, and the 10 carat olive color demantoid.

Tourmaline
Check out the photos of the 34.6 carat bi-color, emerald cut tourmaline, a watermelon, and the neon blue Paraiba tourmaline.

Spinel
An excellent description on spinel. What is interesting is the gold bracelet from Burma with matching spinel octahedral crystals. The prize spinel is a Burmese 36.10 gem red.

Chrysoberyl
The largest known alexandrite sits in the Smithsonian. It is a 65.08 carat from Sri Lanka. It is not the best color, but is worth viewing. Also, they have a 58.20 Sri Lankan cat's-eye with a great eye and honey color.

Stars
The book simply explains why stars star. The book contains excellent photographs of the 330 carat Star of Asia blue sapphire. Also in the publication is the 182 carat star of Bombay. Douglas Fairbanks gave the gem to silent-film star Mary Pickford. Finally, the most famous star ruby in the world is the Rosser Reeves. Although it is pinkish with external glitches, it is a wonder to behold.

Conclusion
This is a must have book for any collector or gem dealer who loves fine gemstones. There is enough technical information to satisfy all readers. It is not boring, but well written and concise. Whether you use this book as an adornment on your coffee table or a vital part of your gem book library, you will find yourself marveling at the photographs and reading about the fascinating world of gemstones and jewelry lore.

You can order this publication for $27.97 via National Gemstone's Bookstore from Amazon. com

Subscribers not on the Internet can buy the book at the GIA bookstore for $39.95 at 1-800-421-7250.

The Crown Jewels: The History of the Coronation Regalia in the Jewel House of the Tower of London
ISBN: 0 11 701359 5
Fifteen years ago a team of accountants and gemologists set out to catalog the lavish collection of 22,599 precious stones that belong to the House of Windsor. The project instead produced a voluminous work that focuses on the history of the treasures.

The Royal family has used the jewels for 100's of years as collateral to wage war, rebuild burned palaces and pay royal dowries. In the Middle Ages, kings carried the crown jewels off to battle because they did not trust their relatives back home at the palace, and because the rocks sometimes had to be hocked to feed the soldiers in the field.

The royals were expert at moving their jewels around. A sapphire that was supposedly buried with King Edward the Confessor in the 11th century now sits on the Imperial State Crown and was recently worn by Queen Elizabeth II. The same crown also has a pair of pearls that reportedly fell off the necklace of Mary, Queen of Scots, when she was beheaded in 1587.

The royal family was so broke at times that it had to rent gems from London jewelers to stick on the crowns for coronations. As Britain became an imperial power, the royal family was able to accumulate its own hoard of crowns, pendants, brooches and ornaments of gold, silver and platinum. In 1830, King William IV demanded every diamond, ruby, sapphire and pearl he could find be encrusted onto his crown. The crown was so heavy it gave him a pain in the neck and a toothache so severe he had to interrupt the coronation to have a molar removed.

Queen Victoria, the 19th-century monarch, was an obsessed collector. She loved the 186 carat Indian diamond, the Kohinoor, or the Mountain of Light. Today the Kohinoor is one of 2,800 diamonds in the crown of Queen Elizabeth's 98-year-old mother, the Queen Mother.

The 3,000 carat Cullinan diamond was found in Pretoria, South Africa in 1905. As news of the diamond spread, it became the object of global fascination. The plan was to ship the gem to London for presentation to King Edward VII. International jewel thieves planned to intercept the shipment.

In the end, Scotland Yard sent the stone in an unmarked package by parcel post, and it arrived a month later in the royal mailbag at Buckingham Palace. The Cullinan eventually was cut into four diamonds--the Stars of Africa, one, two, three and four--and they're now in various jewelry.

Today, the 530.2 carat diamond Star of Africa I is set in the royal scepter that each new British monarch carries in the coronation ceremony. The 317.4 Star of Africa II is in the Imperial State Crown, although members of the family occasionally wear it as a brooch.

The inventory also lists the queen's official dinnerware, such as the 14-pound gold salt shaker and the family's Grand Punch Bowl, an ornate golden utensil the size of a bath tub that holds 29 gallons of champagne. Queen Victoria used to have her children baptized in it.

The official catalog was recently published by the Stationery Office. It costs £1000 or about US $1,700. You can order it at: http://www.national-publishing.co.uk/tsobin/direct.pl?ISBN=0117013595

WARNING TO GEM DEALERS: BOGUS CASHIER'S CHECKS

Reports are filtering to the Gemstone Forecaster that a group of scam artists are targeting gem dealers.

In a recent case, an individual purporting to be Jack Gates, a lawyer from Birmingham, Alabama, called a diamond dealer stating he needed two matching two carat size jewelry quality diamonds (H-I color, SI clarity) for his girlfriend. He confirmed the transaction and instructed the diamond dealer to ship the goods to another address in Atlanta, Georgia. He called the diamond dealer stating he was at the bank to wire the funds to the diamond dealer's bank account, but mentions the bank is having computer problems.

The next day, instead of a wire, a cashier's check arrived Federal Express with a preprinted airbill (but paid for in cash) from the First Nations Bank, 2180 Sixth Avenue North-First Floor, Birmingham, AL, 35203. Along with the cashier's check was a cover letter from the bank stating the funds were being submitted by the bank on behalf of the client, that the funds were guaranteed and that the cashier's check was FDIC insured. The letter was written and signed by Jami St. James, Vice President-Major Accounts.

Irregularities in the letter caused the diamond dealer to become suspicious so he called the bank at the number on their letterhead and was assured by Jami St. James the cashier's check was good. Still unconvinced, the diamond dealer called information and was informed by the operator there was no telephone number for the bank. The telephone number for the law firm the scam artist said he worked for is disconnected. In other words, the laser printed cashier's check and the bank are both fictitious.

What do we know? This scam includes at least three people; the caller, the fake bank officer, and the drop off. Beware of this scam and its mutations and remember a cashier's check is not a cleared instrument until the funds are released to your bank!

INTERNET RETAILERS & AUCTIONS NOT DISCLOSING

According to the FTC, fraud and misrepresentation is running rampant on the Internet. Many large retail jewelry chains, small retailers, Internet-only retailers and auction sites are not disclosing gemstone treatments. The FTC visited 100 sites during the holiday season. According to the report, Internet-only retailers failed the most in gemstone disclosure. Of the 64 gemstone sites, only 5% correctly disclosed treatments prior to the sale and only 37% of 58 auction sites were in compliance. According to the FTC, you must inform the consumer if the gemstones were treated before the sale is consummated. If the consumer would not necessarily see the disclosure page before buying, the site was not considered in compliance.

BURMA AUCTION REPORT

The annual rough auction was recently held by the Union of Myanmar Economic Holdings, Ltd., a government-private mining joint venture in Yangon. The primary bidders were Burmese. Only one westerner was bidding, a few Thai buyers for the Mong Hsu material, and a few Chinese buyers bought jade. Stones that would yield a one carat, "4" color rating, MI1 ruby sold for prices approaching $11,000 per carat. Rough that would yield 2+ carat stones of lesser color and MI2 or worse clarity were being bought for $10,000 to $15,000 per carat. There were only a few sapphires, but their pricing was similarly high. A 46 carat piece of blue rough which would yield about a 10 to 12 carat stone went for more than $67,000.

Why are prices so high at the source?

  1. The material is getting harder to come by. Even the UMEHL announced publicly that production from the famous sapphire mine at Kaday-Kadar is way down, and while ruby production at mines such as Lin Yaung Kyi and Shwepiaye is steady to good, the pieces mined are fairly small.
  2. The Burmese believe they set the market price. If they pay $10,000+ carat, the world will have to pay that, plus profit, if they want Mogok material.
  3. Since many of the buyers were Mogok mine owners, the pricing may reflect their inability to obtain sufficient material from their own mines. The mine owners are constantly complaining about the lack of yield from their mines.

INTERNATIONAL MARKET UPDATES

Diamonds
Sales of rough gem diamonds by the De Beers Central Selling Organization (CSO) totaled $3.3 billion for 1998, 28 percent lower than the previous year's sales of $4.6 billion. Sales in the second half of 1998 were $1.6 billion, down seven percent from the second half of 1997. Retail sales of diamond jewelry in the US and Europe did not compensate for lower sales in Japan and East Asia. Retail demand in Japan, the second largest market, decreased approximately 20 percent below 1997 levels, and Hong Kong polished imports are down 40 percent. DeBeers will continue to hold back rough sales in the interest of stability until it sees a return of confidence in the trade.

Large Canadian Diamond
Canada's new Ekati diamond mine recently found a 47 carat stone. The quality of the diamond is unknown.

De Beers and Canada
Dia Met Minerals, Ltd. and BHP Diamond, Inc. of Canada reached an agreement to market 35% of their rough production of diamonds through DeBeers. The agreement lasts for three years and DeBeers recently opened an office in Vancouver, British Colombia.

Burma
Economy
Economic growth has slowed, the kyat (the Burmese currency) has collapsed, and foreign investment has diminished. The US, IMF, the World Bank and the Asian Development Bank have cut off all new investment to Burma. The cost of living has soared and gas rationing is prevalent. This crisis should continue to affect Burma for the next year or two. The State Law and Order Restoration Council (SLORC) dissolved itself in 1997 due to corruption. The State Police and Development Council, or SPDC, replaced it and the new government promised new economic development. SPDC promised to drive the economy away from central planning to a market-oriented economy. However, the government still controls 25% of the gross domestic product with inefficient state enterprises.

It is difficult to discern the real economy in Burma because the black market is estimated to be as large as the recorded one. Many people survive by the smuggling of jade, precious gems, drugs, timber and bartering.

The government's initial abandonment of socialism brought frantic building and the appearance of new cars. However, real incomes remain where they were 10 years ago. The government continues to print money, which fuels inflation and destroyed the value of the currency.

Colombia
At least 1,200 Colombian civilians were killed in massacres last year, a 16 percent increase over 1997, and the killers were mostly right-wing private militias.

The victims' bodies are left in public places as a warning. Paramilitary groups were formed nearly two decades ago in response to rebel kidnappings and extortion. Rebels have been fighting in Colombia for 34 years. More than 300,000 Colombians displaced by violence last year fled their homes after massacres or fearing they would be victims of such killings.

Thailand
The number of sapphire mines in Kanchanaburi have declined from 100 to five. Golf courses and safari parks are now being built where the mines once operated.

IN THE NEWS

Colored Stone Survey, Jan./Feb., 1999
Here are some new results from Colored Stone Magazine's research of retail jewelers:

Are customers more aware of gem treatments than in 1997?
Yes84%
No16%
(This issue has become an industry hot button due to the recent national television programs. Many trade groups and dealers are discussing the issue. ED)

Predicted Top 10 Bestsellers in 1999

(This is the first time emerald has dropped from the "Big Three" and tanzanite appears to be on a roll. ED)

How is business compared to 1997?
Better62%
Same28%
Worse.10%
(The jewelry business remains in good times. ED)

Colored Stone Sales Growth
All Firms19961997
High Profit Firms4.8%7.6%
Independent High-End-1.7%9.4%
Independent Mid-Range0.0%0.0%
Designer/Custom5.0%38.9%
Chains-3.9%9.2%
1998 Jewelers of America
(As an average, most retail jewelers saw increases in their colored gemstone business in 1997. The Custom Designers saw the most explosive growth. The trend is towards people buying high quality gemstones and mounting the goods. ED)

Jade Jagger
Jade Jagger, Mick and Bianca Jagger's daughter, recently introduced a new collection of jewelry in New York at the Lot 21 club. The collection included diamond and emerald rings and bracelets, plus hand-beaded chokers and "friendship bracelets". Jade Jagger became a jewelry designer two years ago after being inspired by her children's habit of collecting anything that glittered.

UPDATED PRICE CHARTS

Y2K CONTROVERSY

Many newsletter writers and hard asset dealers contend when the year 2000 arrives computer problems will create a situation where we will be without food, water, electricity, phones, other utilities, banking, government, and more for an undetermined time. Many analysts are predicting an economic calamity. Of course, they want you to buy rare coins, newsletters, and survival food to protect yourself. The opposing side contends the entire problem is a scam cooked up by programmers who need work and class action lawyers hunting for a big payday. Who really knows what will happen, if anything? You should never buy anything out of fear or greed. It is fine to place a portion of your assets in gemstones, rare coins, or rural land. However, do not buy hard assets because some dealer scared you into it! Check these sites out if you have an interest in this situation.

The "Y2K is a Hoax" Sites:

Doomsday Y2K Sites:
Want to Party Instead?

The information provided in this newsletter has been derived from research and sources believed to be reliable. However, no guarantee is expressed or implied as to their validity. Opinions included herein are subject to change without notice. The gem market is speculative and unregulated. Certification does not eliminate all risks associated with the grading of gems. Recommendations are meant for those who are financially suited for the risks involved. Past performance is not a guarantee of future performance. Neither NGC nor The Gemstone Forecaster guarantee a profit or that losses may not be incurred as a result of following its recommendations. They may also hold positions in areas they recommend. Subscribers should not view this publication as investment advice, nor is it intended as an offer or solicitation with respect to the purchase or sale of any security.
The following is for snail mail only:
Write:
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P. O. Box 42468
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Call: 1-800-458-6453 or (520)-577-6222

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For comments, questions or price quotes E-mail NGC, Attn: R. Genis

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