Estate and Collectible Jewelry as an Asset Class

The 18th-century Scottish philosopher Thomas Carlyle called economics "the dismal science," not, as I have always thought, because economics often seems less a scientific discipline unto itself than a branch of psychology, and not even, as the story often goes, as a response to Thomas Malthus' gloomy theory of demand outstripping supply to the point of worldwide deprivation. Instead, Carlyle wrote in defense of slavery in the West Indies, indicting economics for promoting the idea of "letting men alone." It was a racist idea, and I am glad to have finally learned the original intent behind it. In my fuller understanding, economics comes out looking better than I thought.

More than once I have sat with someone who has, in so many words, called gems and jewelry a dismal investment. I have never been in any doubt about what they meant. With very rare exception, private jewelry owners dislike their prospects in the resale markets. Yet I think that, to some degree, they harbor a misunderstanding of what jewelry represents in economic terms. It is this: while jewelry really is a bad investment, it really is an asset. Likewise, jewelry has more to recommend itself to the thoughtful buyer looking for long-term value than is usually thought.

Some definitions might help. As an appraiser, I was taught that gems and jewelry fall into the category of personal property, which is marketable, non-investment property. This, in turn, has been termed "consumption" goods, as opposed to "production" goods, that is, things that produce other things: a factory is "production" goods, while a chair is "consumption" goods. The former also produces an income stream.  One can invest in it because it gives a return; and over time, it depreciates, that is, it wears out.

Consumption goods, on the other hand, do not produce an income stream, but, if they are of sufficient desirability, may appreciate; that is, the market may reward them with higher value (beyond simple inflation) - as might be the case with an antique chair of a certain quality. And, just as not all chairs (very few, in fact) fall into this category, neither does most jewelry. By this defiition, what have been called "investments of passion" - such things as art and antiques, fine wines, rare coins, and high-end automobiles - are not investments, as such, but they are assets, and ones that can grow in value.

Most of us in the appraisal field and jewelry trade are legitimately reluctant to speak of jewelry as an investment, but such references are ongoing in the media, even those that specialize in covering business and economics. The right question is, how may we compare fine gems or estate jewelry with other potential vehicles for the preservation and growth of wealth? Technically, the answer can be found by looking at historical prices from original acquisition to results in such re-sale markets as auction, estate and private sales, as well as with second-hand retail dealers, both traditional and online, and then measuring annual rate of return. This turns out to be small comfort to most jewelry owners, who buy average size and quality items in the markets where they are most commonly found.

But I suggest that the results are less dismal than is usually believed. For years, my principal business has been to sell jewelry on behalf of owners who have used the proceeds in a myriad of ways: to help fund new businesses, home purchases and their children’s educations. Almost none of their other possessions were available to do that. At today's gold prices, even many scrap items have performed reasonably well. And the finer the item, the better the outcome.

 In the Middle East and most of Asia, the understanding of jewelry as a primary wealth vehicle is centuries old. Europe, too, has a much longer history of respect for the worth of fine jewelry than do we. As the growth of economies in the rest of the world continues, one may expect an increase in the value of the materials they value most, such as jade in China. We will see demand for jewelry signed with the cachet of the finest brand names such as Cartier and JAR and that which stands as the best representatives of their eras: Victorian, Edwardian, Art Nouveau, Art Deco, Retro, the Cocktail and Moderne of the 1950s, on into the Sixties and Seventies. It is reasonable to expect that these assets, which are rare by definition, will increasingly flow to these parts of the world, according to their specific tastes, but, overall, adding value.

Buying pieces of distinction in retail venues makes problematic the time it takes for appreciation to overcome the prices paid for them. What is undoubted is that, when bought for quality and at the right price, estate and collectible jewelry can result in capital growth over time.

The birth of the modern estate and collectible jewelry market began one April day in 1987 with the sale at Sothebys in Geneva of the late Duchess of Windsor’s jewelry collection. Very few pieces carry the amenity value of her ownership. Still, enough fine-quality jewelry items exist to make your caring acquisitions a viable way to realize returns from this wearable art.