Moissanite stones and vertu jewellery

Moissanite stones may be a revolutionary scientific breakthrough, creating what some think is a perfect alternative to a mined diamond. They have been a commercial reality for the past five years.

The Russians had been counterfeiting diamonds for the past 20 years, and the West only became suspicious when it was evident that the Siberian diamond mines could not have such an enormous production.

Moissanite stones will never be vertu jewellery. The word "vertu" or virtu refers to a taste for excellence in objects of art or diamond jewellery creations. Moissanite stones are essentially 'trompe l'oeil' diamonds, that is diamonds that trick the eyes. They are not likely to be employed in the creations of a jeweller like the famous Grima, who worked in Jermyn Street in London.

So artistic design in diamond jewellery creation has come back into its own. No diamond jewellery designer of the stature of a Grima will waste his time with Moissanite stones. So, we can expect a rise in the price of vertu jewellery, and also of antique jewellery with a historic connection.

A rare, highly authoritative article by James Sherwood in the Financial Times (May 23, 2004) started: "When actress Gong Li appeared at the opening of this year's Cannes Film Festival, she was wearing what seemed to be diamond earrings that would dwarf the Koh-i-noor. These trompe l'oeil diamonds were in fact simulated in gold, courtesy of festival sponsor Chopard's Golden Diamond collection. In other words technically fabulous, though precious fakes."

This shows how far simulated diamonds are part of the trade in that commodity and the degree to which society has come to accept them for its enjoyment and enlightenment.

"Meanwhile, back in London, a brief walk down New Bond Street reveals windows ablaze with fancy coloured stones that, to the untrained eye, look too good (and too big) to be true - but in fact are the real thing," Sherwood continued.

"Add the two together, and there's no escaping the conclusion that these days jewels have been shoved through the looking glass, and for of us the true value and provenance of a gem is no longer possible to gauge with the naked eye."

The Velasquez cardinal

There was recently the sale of a vast baguette emerald ring, which is the same one as that in a Velasquez portrait of a 17th century Spanish cardinal. This realised Lm1.2 million. It was sold within a week of going on display.

The Velasquez cardinal's jewel shows the fascination that is exercised on collectors by antique jewellery with a famous historical connection. Collectors are prepared to pay a premium for this fascination and for the fact that such jewellery hardly needs to be checked in a laboratory.

Malta was the recipient after World War I of Russian Czarist jewellery on a considerable scale. Herbert Ganado describes, in his now famous memoirs Rajt Malta Tinbidel, how in 1918 top Russian aristocrats, who had been evacuated by the British from Odessa, walked up and down Kingsway in Valletta offering the finest jewels from the Siberian mines at a fraction of their price.

Much of this jewellery still remains in Malta, and it could more than compete with the best antique Czarist jewellery to be found for sale in St Petersburg in the 19th century, which received the attention of The Financial Times.

DBR's research

DBR's research unit in its Sliema office has been consistently correct in forecasting the rising price of gold and silver in the past 14 months. On February 6, 2005, DBR published an article in this newspaper entitled "Gold is back - 25 years after it peaked. The dollar is down - 20 years after it fell".

Since then everyone knows the percentage by which gold has risen. Less obvious are the reasons why it has risen, and why diamonds have not displayed a similar spectacular rise.

Diamond prices are by means reacting to the present dramatic rise in the price of gold and silver, as they did during Bunker Hunt's attempt to corner the world silver market 27 years ago. Those were the days when magnificent antique silver plate was being broken up in Hatton Garden in London and sold as scrap.

Madness had seized the silver buffs. Silver then touched $50 an ounce. It is now only $5.40. This last price, corrected for inflation, is still about 80 per cent below that of 27 years ago, so silver has a long way to go.

The same applies to gold which, at $600, is massively undervalued compared to the price of 27 years ago corrected for inflation.

The rise in the price of silver was foretold in the newspaper two months ago, on February 12. Those investors who followed this research report made packets, on the more than 30 per cent rise recorded since that date. DBR's research has demonstrated its validity in the care of silver. It will seek to do the same in the case of diamonds. Research will necessitate a visit to Antwerp.

Diamond prices have been more or less steady during these past 15 years, when they experienced a sudden, 30 per cent rise in price. They have since then been oscillating about 10 per cent up or down on by no means remarkable diamond price.

Surprises might be in the offing: Sotheby's of London has started diamond auctions, bypassing the famous monopoly dealers, thus cutting down prices for serious investors.

Could the price of diamonds increase, when it is not underpinned by the recent renaissance of central bank demand for gold? Last November the world gold conference in Johannesburg declared that gold had an important role to play in the modern portfolio of central banks.

Philip Manduca of Titanium Investments declared on CNBC that there were now two currencies in the world: gold and the dollar. Diamonds do not have such a role to play and I have not yet come across a reliable quantitative assessment of the economic impact of Moissanite stones, such as those created by Charles & Colvard.

The conclusion is however that an excessive indulgence in diamond collection is much to be preferred to several other forms of indulgence by the senses.

(Concluded)

This article is not intended as investment advice, but aims to help produce an investment culture. John Azzopardi Vella has promoted the Malta Development fund and advised S&P. He is currently research economist of DBR Investments Ltd. E-mail: johnazzopardivella@hotmail.com.