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In-Depth
The Value of a Report
How important is a grading report to the sale of diamonds and colored gemstones at auction?
By Ettagale Blauer
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Ruby and diamond necklace by James W. Currens.
Photo courtesy Sotheby’s. |
It is virtually impossible to sell an important diamond or colored gemstone at auction without a grading report from a reputable laboratory. Today’s diamond and colored gemstone market is driven by three basic questions: What is the material, is it natural and has the stone been altered by a treatment of any kind? But there are other issues besides physical characteristics and quality markers that are addressed by grading reports — including condition, country of origin and provenance — any one of which can impact value.
Growing demand from auction buyers for beautiful gems, coupled with a finite supply, has expanded the types, sizes, quality and dollar value of gems that require reports. “The reports are a form of assurance for the buyer,” says Jill Burgum, senior director, fine jewelry, Heritage Auctions. “The reports, when issued by a well-respected independent laboratory, instill a comfort level as buyers trust they are getting exactly what they are paying for.”
For Burgum, any diamond 1 carat or larger and any gem priced from $10,000 and up must have a grading report, although she notes a client recently asked for one for a $2,000 stone. Grading reports are now expected for the sale of most gems, says Gloria Lieberman, vice president, Skinner auctioneers in Boston, “particularly anything of quality, even if it is a smaller stone, such as clean ruby, even 1 carat. People are so used to having lab reports.” Susan Abeles, Bonhams vice president and director of its U.S. jewelry department, notes that “for anything 3 carats or more, and high color, we need a grading report.”
Generally, for diamonds, buyers want a grading report from the Gemological Institute of America (GIA), but for colored stones, potential buyers sometimes prefer three reports: American Gemological Laboratories (AGL), Gübelin and GIA. Abeles adds that there is some flexibility, noting that “AGL is accepted in the United States but we can go to SSEF and Gübelin for European clients.”
With more than one lab grading a stone, opinions can, and do, vary. It is not uncommon for labs to identify different countries of origin, a crucial point in pricing rubies and sapphires. “In many cases, we have gotten more than one report, with conflicting opinions,” Abeles says. In that case, all the reports are given to the potential client. “For a very fine gem, it is more than normal to cover all our bases. It’s due diligence.”
The importance of grading reports to the auction market cannot be overstated. Gary Schuler, senior vice president and director of jewelry for Sotheby’s, says, “The GIA has made the business more international in scope and allows you to conduct business in the digital age. We would not be able to sell a diamond to some guy 10,000 miles away if it were not for the GIA.”
“We look at the report as we look at provenance from an estate, especially on colored gems. When it says ‘Colombian origin,’ ‘Argyle pink,’ ‘Burma ruby,’ ‘Kashmir sapphire,’ it makes a difference,” notes Burgum. “If it says ‘old mine Colombia,’ that adds provenance and value.”
Just as the nonphysical characteristics of a fine diamond or colored gemstone, such as provenance, can greatly impact and enhance value, so, too, can the age of the grading report itself. Just how old can a report be and still carry the assurance it’s meant to convey? Rahul Kadakia, international head of jewelry for Christie’s, says, “If it has been five years, it is time for a new certificate. For big, flawless diamonds, I would say two years.” Schuler tightens the time frame even more. “For a flawless or IF stone, it has to be a recent certificate,” he says — within a year. “It depends on the value.”
If the current grading report is ten years old, Abeles says, her company sends out for a new one. “Standards and technology have improved such a huge amount. Even diamond grading has improved significantly.”
John King, chief quality officer for the GIA, says, “Our position is that it is appropriate to resubmit a stone for grading when the GIA has introduced modification to the grading process itself.” For white diamonds, such modifications would include the cut grade for the round brilliant introduced in 2005 and for colored diamonds, the “vivid” and “deep” categories introduced in 1995.
“For many of the colors before then, the top grade was fancy,” explains King. “As we began to see more interest and more stones coming on the market, we looked at ways we could modify the system. Around 1987 to 1990, a diamond color could have been fancy, deep, vivid, but it was just called fancy blue.” Over time, and with more material to work with, he says, “We saw ways to differentiate, to better explain the color you were seeing.” When those new grades were introduced, dealers were motivated to resubmit stones to get the more specific, and, hopefully, more intense designation. If a stone has been on the market and has been “bruised by wear and tear,” King says, it is probably a good idea to update the report, noting that it can become dated in as little as six months.
Christopher Smith, president of AGL, which specializes in colored gemstones exclusively, says the age of the report is more important for colored gems than for diamonds — not because of wear and tear, but because of widespread awareness of and concern about colored gemstone treatments and enhancements. “Policies regarding treatment disclosure have changed,” he explains. “In the 1980s, there was no disclosure being made. As time went on, into the ’90s, there was an evolution of disclosure within the trade and on lab reports. At the same time, as our understanding of certain treatments and the detection of certain treatments have progressed, so have disclosure policies.”
AGL reports also offer that elusive, highly valuable bit of gemstone identification: geographic origin. “We offer country of origin for rubies, sapphires, emeralds, copper-bearing tourmaline and spinel,” Smith says. The lab does not identify location for certain other stones such as topaz, quartz and aquamarine. Regarding geographic origin, Smith notes, “Our knowledge of gemstone sources grows over time.” Labs have people at many colored gemstone mines, buying specimens to use for future comparison.
“With regard to colored gemstones,” says Burgum, “reports are necessary and crucial to the sale of gems that have specific origin identifications. Treatment identification in colored gemstones is also significant information to have included in reports as this directly affects value.”
In spite of the cost and time involved in having a stone graded by a reputable lab — or more than one — buyers and sellers agree that grading reports have become an accepted part of offering gems at auction. No matter the physical properties, quality, rarity, origin or provenance of a stone, the fact is that it is likely to sell more easily, attract more bidders and command a higher price if the auction house description and claims for the stone are backed by an independent third-party grading report.Article from the Rapaport Magazine - April 2015. To subscribe click here.
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