TABLE OF CONTENTS PART ONE

COLORED DIAMONDS: AUSTRALIAN PINK

By Robert Genis

Colored diamonds are some of the most fascinating gems to collect. This includes reds, blues, greens, pinks, yellows, oranges, and browns. Some people only need to see a colored diamond to be hooked forever. Although they share the same physical properties as a white diamond, when it comes to reflecting light, these stones are basically geological freaks of nature. DeBeers cannot even compute the ratio of colored diamonds to white diamonds because they are so rare. Colored diamonds combine rarity, beauty, and sex appeal. They are the ultimate connoisseur collector gemstone.

Recent Discovery
Until the recent discovery of pink diamonds in Australia, most pink diamonds were very pastel. You really had to use your imagination or see the stone in the perfect light to see a hint of pink. Most dealers believed true pink stones would probably be never found more than once or twice a century. Occasionally, by properly mounting the stone, the diamond appeared pinker. In the early 1980s Australia, known for low-quality small diamonds, discovered a minute fraction of their output was pink. In no time, this new supply of pink diamonds hit the market. Compared to pink diamonds from India, Brazil, and South Africa, these stones were obviously pink. Gem collectors went crazy!

As a general rule, the new Australian diamonds tend to be small. Many collectors who would never buy a white diamond under one carat, fought over each other to buy Australian pink diamonds under one carat. Most Australian diamonds over 2 carats are pastel, and those which are fancy pink cost a small fortune.

Famous Pink Diamonds
At one time only men wore diamonds. Then Charles the Seventh of France gave a 5 carat pink to his mistress, Agnes Sorel. This forever changed the gift-giving relationship between men and women.

The Williamson, Tanzania's most famous diamond, is a 23.60 carat pink. It was named after the famous Canadian geologist Dr. John Williamson (1904-1958). He discovered the Tanzanian kimberlite pipe in 1940. The Williamson was cut from a 54.50 piece of rough. Like most South African pink diamonds, the stone is pastel pink. Queen Elizabeth received this diamond when she was still a princess. Today, it is part of one her favorite brooches.

India's fabled pink diamonds were also light pink. India was the world's main source of diamonds in the 16th and 17th centuries. In 1989, the famous 32.34 light pink Agra diamond sold at auction for about $6.6 million. Rajah of Gwaliar gave the stone to Babur, the first Mogul emperor, for sparing his life when Agra was overtaken by Babur. The stone also belonged to the Duke of Brunswick, the 19th century diamond connoisseur, who considered it the centerpiece of his diamond collection.

Brazil also produced pink diamonds. The Star of the South, Brazil's most famous diamond, is a 128.80 rose colored diamond. It was cut in Amsterdam in 1832 from a 261 carat piece of rough. A wealthy Indian collector paid $80,000 British pounds for the diamond in 1860. Today, the stone remains in India.

Country of Origin and Color
It is not known exactly why the color of pink Australian diamonds is pink. When a diamond is pure carbon, it is colorless. A defect in the crystal building blocks or the presence of an interloper atom creates the color in diamonds. Purple/pink diamonds may be created by the presence of nitrogen.

Why are Australian pink diamonds more intense than those from Africa or Brazil? Most non-Australian pinks receive a light, faint, or fancy light pink designation from the GIA. Australian pinks possess graining due to way they were formed in nature. If you look at pink diamond inclusions in a microscope, you will often see structural deformities that look like pink needles in an ice cube. The pink color emanates from this graining. If you really study the gem, you may see areas of pink graining and areas of colorlessness. It is the cutter's job to orient the crystal to get the maximum amount of pink when the stone is face-up. This is a very difficult task.

Production
The total annual production of Australian rough pink diamond may be a few thousand carats. Compared to the historical output from Brazil, India, and Africa, this amount is significant. In 1996, Australia marketed 47 carats of pink diamonds. In 1995, Australia sold 46 carats of pink diamonds.

Cutting
Australian pink diamonds lose 70-90% of their weight when cut from the rough. White diamonds tend to lose 50% when cut. Also, pink diamonds take twice as long to cut. This is because the pink rough found in Australia is heavily included with fractures and crystals. The Australian pink diamonds require special wheels for grinding. Argyle cuts the rough in its own factories in Perth.

Recent Prices
Argyle recently auctioned this year's production in Geneva, Switzerland. Buyers bid from Tokyo, Hong Kong, Perth, London and Geneva. The stones averaged more than $100,000 per carat. Thirteen buyers bought the 47 diamonds. The best stones were a 3.06 purplish and a .93 oval purple/red. The largest pink was a 3.66 cushion.

Recent auction prices include the October, 1995 Sotheby's sale. A 5.04 pear shape, fancy pink, VS2, sold for $87,798 per carat, or $442,500. Also, a 3.03 oval, fancy pink, VS1 sold for $173,267 per carat or $525,000. In October, 1995, at Christie's, a 3.03 rectangular, fancy purple/pink, VVS1 went for $291,254 per carat, or $882,500.

What To Look For
Australian pink diamonds have two problems. First, the vast majority are small. Second, most are included. What is vitally important in a pink diamond is the color. Saturation is the key to collecting colored diamonds. Inclusions that would not be acceptable in white diamonds are perfectly acceptable in colored diamonds. A colored diamond can have inclusions and still be worth hundreds of thousands of dollars per carat. Remember, it is better to have an intensely saturated colored diamond with inclusions, than a clean, non-saturated, lightly colored diamond.

Collectors
The colored diamond market is a collectors' market. Most pieces are sold at auction or brokered to private collectors. Prices in the six figures are common. Collectors, not dealers, jewelers, or investors dominate this market. Most stones disappear into collections and are not seen again for years. Some collectors never stop with a main stone, they keep collecting until they have as many different examples of colors they can find. Other collectors specialize in one color, and collect every colored diamond they can find, irrespective of size. Since these stones are rare to begin with, this process makes colored diamonds even rarer.

How to Order
Experts believe there may be no more than 4,000 carats of red, pink, blue, green, purple, yellow, and orange fancy colored diamonds for sale at any given time on the world market. These stones are so rare, you cannot simply call a dealer or jeweler and say, "I want a carat size pink today." Most retail jewelers do not even offer colored diamonds for sale. Most diamond dealers do not deal in colored diamonds. Certain specialty dealers have private/collector and dealer contacts, but you may have to wait until one enters the market for sale.

Conclusion
Colored diamonds may be the last frontier in high end collectibles. The beauty and rarity of these stones has created unprecedented desire and unparalleled prices among collectors. They have been immune from the wide downward swings like the white diamond market experienced in the 1980s. Although these diamonds do go up and down, worldwide collectors have not found a ceiling on their prices. Many collectors approach this market in a similar way as the art market. What price can you put on a Van Gogh or Picasso?

Irrespective of your budget, you can collect colored diamonds. With this in mind, high end connoisseurs should specialize in carat size plus pinks or blues. Moderate budget collectors can purchase subcarat blues and pinks, or carat size fancy oranges or yellows. Even if you are on a limited budget, you can collect fancy brown diamonds.

As most long time readers of the Gemstone Forecaster are aware, we consider a conservative ideal model collector portfolio to contain a Colombian emerald, Mogok Burma ruby, and a Burma or Kashmir sapphire. We are now including colored diamonds in that portfolio mix. Feel free to contact National Gemstone if you have any questions or need a colored diamond quote.

INTERNET KUDOS

The National Gemstone Internet Web Site continues to receive kudos from numerous on-line publications and search engines who review sites. Thank you.

FAMOUS COLORED GEMS AND JEWELRY

Mary Pickford, the famous movie star, loved large rubies and star sapphires. She owned the 60 carat Star of Bombay and the 200 carat Star of India sapphires.

Gloria Swanson wore an emerald and amethyst necklace in the 1920 movie, "Affairs of Anatole".

Marlene Dietrich wore a cabochon emerald and diamond matching earring and bracelet suite in many of her movies. She wore her own ruby bracelet in "Stage Fright", which recently was sold at Sotheby's for $900,000.

Joan Crawford had a 70 carat star sapphire engagement ring. Her favorite bracelet had three star sapphires.

Richard Burton gave Elizabeth Taylor an emerald and diamond brooch as an engagement present. He also have her an emerald necklace as a wedding present. Another husband gave her a cabochon sapphire ring. Her third husband, Mike Todd, gave her a ruby necklace and matching earring set.

Jackie Kennedy Onassis received a 47 carat kunzite ring, an amethyst necklace, red tourmaline earrings, and a 17.68 ruby ring. All these colored gems were given by President Kennedy and recently sold at auction.

Queen Elizabeth is also known for her jewelry. It includes the Timur Ruby - a 352.50 carat spinel, the Prince Albert brooch, a large sapphire given Queen Victoria by Prince Albert, and Queen Mary's large ruby earrings.

Princess Diana also kept her jewelry from the divorce of Prince Charles. It includes the large oval sapphire engagement ring, diamond earrings with an emerald drop, and a diamond and emerald bracelet.

AUCTION NEWS

Sotheby's sold $22.5 million, or 71% of their lots in October, 1996. The top lot was a 19th century necklace with 23 blue Burma sapphires and old-mine-cut diamonds, which sold for $2.7 million. A ruby necklace sold for $882,500. At Sotheby's, 100% of all major pearl necklaces sold, primarily to Asian buyers. Christie's sold $31.4 million, or 79.1% of their lots during the October auction. The sale featured jewels from Ginger Rogers, Dinah Shore, Audrey Meadows, and Gene Tierney. Ginger Rogers's diamond ring went for $129,000. Her emerald and diamond jewelry suite sold for $43,700. Audrey Meadows's ruby and diamond necklace sold for $112,000. A diamond cluster necklace with 52 carats of diamonds sold for $1.9 million. A 101.31 heart shaped diamond, D- internally flawless failed to meet its minimum bid of $14 million. The highest bid for the diamond was in the $8-9 million range. A fancy blue pear shaped diamond sold for $1.3 million. Finally, a diamond necklace by Harry Winston sold for $904,500.

INTERNATIONAL MARKET UPDATES:

Diamonds
Hope Diamond
The most famous diamond in the world, the 45.52 carat blue Hope Diamond, recently was moved from the Smithsonian to Harry Winston's. It was carried in a leather and suede carrying case by a 40 person SWAT team with UZIs.

Harry Winston plans to refurbish the necklace that holds the diamond, rather than the stone. The plan is to put the diamond in the new Harry Winston gallery at the Smithsonian in September, 1997. The Hope will be on a revolving stand, and the Smithsonian wanted to make sure all the links of the necklace were tight.

The Curse of the Hope
In 1642, Tavernier, the famous gem dealer and traveler, brought the French Blue diamond from India. At the time it was a rough diamond of 112 carats. Tavernier sold the stone to Louis the Fourteenth. He had it recut to a 67.50 pear shape. He died shortly after he had the stone cut. His mistress, Countess Du Berry, was beheaded shortly after she wore the diamond.

The Hope was passed to Louis the Sixteenth and Marie Antoinette, who were also beheaded. It remained in the French Treasury until the great gem robbery of 1792.

Some believe it was then recut to its present size. The stone appeared in the 1830s and was purchased by Henry Hope, a gem collector, for $90,000. He died in 1839, and Henry Thomas Hope, a nephew, displayed the stone at the 1851 Crystal Palace Exposition. In 1887, the wife of Henry Thomas died, and she bequeathed the stone to Lord Hope, her daughter's son.

In 1894, Lord Hope married an American actress. Her comeback proved unsuccessful. Later Lord Hope had to sell the stone to pay for his financial debts.

In 1908, a Turkish Sultan bought the stone for $400,000. However, because of a revolution, he was forced to return the stone to Paris for it to be resold.

In 1911, Cartier bought the stone for $154,000 and sold it to Washington socialite Evelyn Walsh McLean. She was the wife of Edward McLean, the owner of the Washington Post. She was beset with tragedy. She lost her son in a car crash, her husband died, and her daughter overdosed on sleeping pills. The stone was eventually sold to Harry Winston for $179,920 in 1947. He donated the stone to the Smithsonian in 1958. A woman once wrote a letter to Harry Winston begging him to take the stone back because since he made the gift, the county had fallen apart! The diamond is the most popular exhibit at the Smithsonian.

White Price Increases
The recent demand for diamonds has increased prices. For the first time since December, 1995, we have increases our diamond price matrix. The D-H colors, IF clarities rose approximately 3%. The D-H colors, VVS1 increased 5%. The D-H colors, VVS2 clarities rose 6.5%. The D-H colors, VS1 increased 9%, and the D-H colors, VS2 increased 10%.

Recent DeBeers Rough Diamond Increases
YearIncrease
19822.5%
19833.5%
19867.5%
198710.0%
198813.5%
198915.5%
19905.5%
19931.5%
19955.0%
19963.0%

The double digit increases in the late 1980s were caused by the hot Japanese market. Then world-wide recessions hit the U.S., European, and Japanese markets. This caused diamond prices to barely move in the early 1990s. However, DeBeers has increased prices two times in the past year and a half. Some fine polished diamonds are up 20%. Look for this trend to continue.

When DeBeers announces a 3% price increase, what exactly does that mean? The number is simply an average of over 5,000 classifications. The recent price increase means large stones went up significantly, and the average does not seem like much because it is computed with the decreases in small diamonds!

How Rare is Rare?
Diamonds
CaratsComments
0.50Not that rare. Slight movement in better goods.
0.75A little bit expensive; they are around, but the better goods are a little scarce.
1.00Hard to find; you don't see the higher colors.
1.25Very scarce; scarcer than the 1 caraters.
1.35Scarce.
1.40Scarce.
1.45Scarce.
1.50You can find some.
1.75Not a lot around.
2.00Do not exist.
3.00More plentiful than 2 or 4 caraters.
4.00+Shortages in some sizes; there's 50% less availability than there was two years ago.
Source: National Jeweler Survey, October 1, 1996.

Million Dollar Bra
Victoria's Secret's "Christmas Dreams and Fantasies" is offering a Miracle Bra with 100 carats of diamonds and semiprecious stones. The price? A cool $1 million.

COLOMBIA

Price Increases
According to Colored Stone, Volume 9, #15, November/December, 1996, reports from Colombia indicate Colombian emeralds have increased 35% since last year. The reason is because all the fine goods are coming out of Muzo. The owner has elected to sell his rough overseas directly to Israel, Switzerland and Hong Kong via auctions. Therefore, the local dealers have had to raise prices due to the lack of material in Bogota.

Politics: Schizophrenic US Relations
In September, 1996, President Clinton authorized $40 million worth of military equipment for the Colombian army. It included helicopters, observation planes, utility vehicles, parts, and communication equipment.

The US response was in reaction to the violent attacks reported in our last Gemstone Forecaster. Last year the US cut off foreign aid to Colombia because the US said Colombia has not cooperated with the US effort to halt drugs coming from Colombia. This follows allegations that Colombian President Samper accepted money from drug dealers in the 1994 election. The State Department also revoked President Sampers visa.

The US government stated they were concerned about reports the leftist guerrillas were heavily involved in drug trafficking. The attacks were conducted by the Revolutionary Armed Forces of Colombia, or FARC. FARC still holds over 50 Colombian soldiers hostage. The police have abandoned 56 small towns this year because of guerrilla activity.

According to the Department of Defense and the Drug Enforcement Agency, between 10,000-15,000 guerrillas are involved in the drug trade. Studies speculate the guerrillas are making between $300-360 million per year, with the drug trade providing 1/2 of their income. FARC is making a commission off of each load of cocaine and heroin that travels through their controlled areas. Some reports contend the FARC grows their own cocoa and poppy, runs laboratories, and transports the drugs to Venezuela.

Property values have dropped 80% in the guerrilla controlled areas. The US State Department now advises against travel in over 70% of Colombia.

SOUTHEAST ASIA

Burma (Myanmar)
The amount of unheated red Mogok ruby is practically non existent and prices are up dramatically. According to our overseas sources, Burmese dealers in Mogok are offering flame fusion synthetic rubies as natural ruby. Also, reports indicate the Burmese are selling pink sapphire and ruby doublets as natural ruby.

A new Burmese government corporation, the Union of Myanmar Economic Holdings Co, Ltd. or UMEHL, is now controlling the ruby trade in Burma. They control the ruby areas in Mogok and have opened an office in Thailand. In May, they auctioned over $2 million worth of colored stones and jade. Most of the buyers were locals.

There are also new government rules in regards to buying and selling Burma ruby, sapphire, and spinel on joint venture operations. All of the rough discovered in Mogok is sent to the government. Low quality rough is returned to the miners to dispose of as they wish. The mining company pays a 20% tax on the appraised value of the higher qualities. The gems are then cut and trading can begin. Also, for a small fee, Burmese nationals can obtain a license to trade in Burmese material. They can sell the gems to foreigners. The foreigner pays a 10% tax to the Burmese gem dealer, who later pays the government.

Vietnam
According to the International Marketing Consortium, an American company that markets Vietnamese gems, they will be offering a 2,165 carat Vietnamese ruby for sale. They also contend they have recently found a pocket of red spinel with some stones over 10 carats. If true, this may be an impetus the spinel markets need! Lastly, they expect to market Vietnamese pink sapphire.

AFRICA

Tanzanite
Supply for medium quality tanzanite is good. The supply of high quality tanzanites is not available.

Tsavorite
The supply of tsavorite is running very low.

COLLECTOR'S CORNER

New Stones in 1997
For collectors on a limited budget, a new spessartine garnet from Pakistan is coming to the market. They go from an orange-red to a red-orange. Expect a few hundred carats, but they are not as orange as the Namibian material and possess more brown. Also, Montana is producing sapphires in blue, orange, padparadscha, golden, yellow, and pink colors.

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