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Tanzanite as an Investment

If you are looking to invest in Tanzanite, the article below explores the possibilities. We also offer a gemologist selected collection of the very finest Investment Grade Tanzanite.

It has been a theory touted by many an online and television seller and purveyor of Tanzanite - "Tanzanite is the gemstone investment opportunity of our generation". Is this really the case or is it simply more marketing hype? We try to explore the modalities of Tanzanite's potential as an investment vehicle and analyze why it may be considered a viable and effective investment.

Tanzanite's Unique Niche

Firstly, if we look at the gem kingdom as a whole, it becomes clear that Tanzanite occupies a unique niche. It is one of the world's rarest gemstones, found in only one place in the whole world - a place called Merelani, on the foothills of Mount Kilimanjaro, Africa's highest mountain. Geologists believe that it was the eruption of Mt Kilimanjaro that provided the unique set of conditions for Tanzanite to form. The presence of Vanadium and other important chemicals in the ground combined with the required heat and pressure sustained over 500 million years, led to the creation of one of today's most beautiful gemstones. The combined rarity of these factors mean that the likelihood of Tanzanite ocurring and subsequently being discovered in a different location are highly unlikely. This effectively sets the stage for the economic reasoning why Tanzanite may be considered a viable and potentially excellent investment.

Economic Theory - the Demand side

The principal factors, advanced by traditional Keynsian economic theory, that drive economics in a free market economy, are demand and supply. In the case of Tanzanite, both are overwhelmingly in its favour. Demand is growing exponentially for this gemstone. In the US market, the largest market for Tanzanite, the growth is both organic and ochestrated. Organic, driven by consumer's appreciation of this beautiful gemstone and jeweler's subsequent advocation of its qualities, and orchestrated; largely due to voracious marketing on the part of Tiffany & Co. in the early years and more recently by Tanzanite One. Tanzanite One is a Tanzanite marketing firm listed on the London Stock Exchange, seeking to make Tanzanite the stone to buy at the birth of your first child. If successful, this campaign is expected to have a similar effect on Tanzanite as De Beers' "Diamonds are forever" campaign did on Diamond sales in the mid nineteen hundreds. Their campaign had the effect of making Diamonds synonymous with engagements and diamond rings as symbols of engagement, subsequently driving diamond sales stratospheric. If the campaign to make Tanzanites and Tanzanite jewellery synonymous with the birth of one's first child is similarly successful the expectation is that the demand side of the equation will be effectively taken care of worldwide.

This factor is also bolstered by Tanzanite's fairly recent inclusion in the Birthstone list. Tanzanite was named as a birthstone for December - the first time the list has been altered since 1912. An auspicious and important factor in assessing Tanzanite's popularity and hence the demand for this gemstone.

Tanzanite Price History

This video takes a look at Tanzanite price trajectories since its discovery.

 

Upcoming Markets

Lastly, aside from the world's established gem markets, there are several new and upcoming markets which are further increasing the potential demand for Tanzanite, notably India and China. As these markets develop, gemstones sales in general will benefit enormously, as both cultures have long standing love affairs with precious stones. More notable is the fact that both cultures have a love for colored stones with metaphysical properties. Tanzanite, as a rare and revered gem with connotations that its pure violet blue depths have healing properties (metaphysically, Tanzanite is said to activate and integrate the energies of the heart, throat, third-eye, and crown chakras, creating a condition in which the mind and psychic abilities are activated and guided by the wisdom of the heart) makes it the natural choice of an annually growing market of Chinese and Indian buyers. As their appetite for Tanzanite grows, the increase in demand could be extraordinary.

Economic Theory - the Supply side

The preceding paragraphs have explored and effectively demonstrated how the demand side of the economic curve is amply catered for in Tanzanite's case. Just as important, is the supply side however, as an increasing demand for an item can be amplified immeasurably in economic terms if it is matched by a corresponding decrease in supply. This is exactly what is, and has been happening with Tanzanite for some time. Supply is becoming increasingly limited as the world's only source is mined frantically to keep up with enormous and growing demand. The result is that the stone is becoming increasingly difficult to find, especially in the finer qualities which traditionally constitute less than 1% of total production. Certainly, in the many years we have been dealing in Tanzanite, we have noticed an unprecedented decline in the availability of the very finest stones despite our proximity to the mines. There simply is very little of this precious material being found today. Latest geological estimates have indicated that the life of the mines may only be 10 more years at present production rate but if present market conditions prevail, we believe that the very finest Tanzanite will become unavailable long before that.

In Summary

Having explored both sides of the demand/supply equation, it is clear that with rapidly growing demand and supply shrinking, simple economic theory dictates that Tanzanite prices will increase substantially. Already there has been a threefold increase in just 6 years. However, further to our expectation of gradual increases over time, many gemologists and speculative investors are of the opinion that the stone's real value as an investment lies in the potential for astronomic prices once it has been mined out, and the world's enormous demand for Tanzanite can only be catered for from what exists in private hands. At that point, Tanzanite values, most especially for the finest material, will be extremely high. There are other gemstones with a similar history from which we can draw parallels. Paraiba Tourmaline, for example, found in the late 1980's in Brazil, mined out by mid 1990's can now cost as much as US$20,000 per carat. Alexandrite, found in the Ural mountains of Russia a generation ago and extremely rare in fine qualities is a similar price. Both stones traded close to Tanzanite prices do now in the days when they were being mined.

In summary, many factors combine to indicate that Tanzanite is uniquely placed in the gem kingdom to be a potentially excellent investment. Its final and heretofor unmentioned advantage over other investments such as stocks and bonds is that it is a tangible asset - a thing of beauty that can be flaunted and enjoyed as its value increases.

 

Copywright Lapigems Gem Company 2012
No part of this article may be reproduced without express permission



Investing in Tanzanite - Where to begin?


Now that it has become clear that Tanzanite is a potentially excellent investment what do you look for when beginning an investment collection? Below is a series of answers we have provided to various clients asking pertinent questions on this subject over the years:

1. What quality of Tanzanite should I collect?:

Answer
: Whilst owning any Tanzanite in the years to come when Tanzanite is no longer mined, will stand you in good stead, most gemologists would recommend compiling a collection of the finest grade - the rare pieces of exceptional color saturation that occur in only 1% of Tanzanite. At the simplest of levels - these stones constitute less than 1% of all Tanzanite production already so are considered rare and more valuable by the trade. They also conform to the industry's standards on colored stones which dictate that the deepest and most vivid colors are finer. Whilst some would disagree, and prefer the paler lilac shades, the market tends to conform with the industry standard. Hence if you own the finest grades as denoted by the industry, you are more likely to realize a better return on your investment when you come to sell. Lastly, as they are so much more scarce you will have much less competition when selling which always translates into a higher price. Hence in a situation where you have a budget to adhere to, it would be better to resist temptation to go for a larger B grade piece and opt instead for a smaller top grade stone in order to ensure that your collection is made up of fine pieces. Also recommended is to ensure that the stones you buy are true investment grade not simple A grades, which is mostly what is sold online. especially on the larger caralog sites. There is a big difference in rarity and subsequently price. You may want to use our
Tanzanite Buying Guide  to learn more about how to judge Tanzanite.

2. Is there a particular carat weight or size I should collect?

Answer
: This is an excellent question and one without a clear answer as there are 2 schools of thought. The first advocates that the larger the stone the better so you should go for the largest stones you can afford. The theory behind this thinking is that these stones are exponentially rarer and therefore will command collector's attentions better. The other school of thought disagrees and touts the fact that small Tanzanites in true investment grade are just as rare as 20+ carat ones (some argue rarer) so a collection made up of very finest grade 1 and 2 caraters is the best option. Perhaps a more balanced approach is to recommend a mix of sizes, this way you can have the best of both worlds and if you can't afford a 20 carat piece, then rest assured that your collection of 1 carater exceptional pieces is just as rare.

3. Is there a particular shape or cut that is more valuable and better for my collection?

Answer :
No, it is purely a matter of personal preference. No particular shape is considered more valuable or more sought after in the trade and no one cut or shape that is considered intrinsically more valuable than another. In fact the cut itself is purely a factor of the shape of the rough - the cutter will choose the eventual finished cut shape on the shape the rough presents, as this means the least weight loss and highest yield. What matters in terms of cut is the quality of the cut itself rather than the shape. Look for fine cutting and good light return. 

4. Where should I buy Tanzanites for my collection?

Answer :
  With the myriad of opportunities to buy Tanzanite online, on the TV, at retail stores... it is easy to become confused as to where to get the best deal on the best stones possible. We would recommend adhering to the following principles when choosing your source. Firstly, look for sellers who provide a clear gemological grade for their Tanzanite and do not simply use subjective language.  Look for sellers with an in depth knowledge of the gemstone as different grades go for different prices and you don't want to end up paying a top grade price for a single-A stone. Only go with sellers that offer an unconditional return policy.  Lastly, with the recent introduction of cobalt coated Tanzanites always purchase from an experienced, reputable and knowledgeable source. More on this on our Tanzanite FAQ page.

Whilst this section is intended to answer frequently occurring questions relating to buying and investing in Tanzanite, obviously there may be questions we haven't answered here. There is a further resource on Tanzanite FAQ  page which answers further frequently asked questions in depth. Alternatively don't hesitate to use our acclaimed Ask a Gemologist feature to direct your questions to a GIA gemologist.

 


Further Reading 

This is an interesting article written by Moneyweek which looks at the subject from a different angle :
"Move over Diamonds it's Tanzanite's Turn to Shine" We include it here as further reading.

 

 

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Lapigems Gem Company is a member of / staff hold qualifications from the following leading Gemological Organizations