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Passion investment: Cut and uncut gemstones
Amid current climate of uncertainty, gems offer credible case as alternative asset, valuable diversification tool
Tom King   18 Mar 2025

Gemstones have long held a unique position in alternative investments, combining aesthetic appeal with tangible asset value. For high-net-worth individuals and collectors, these precious stones represent a form of “passion investment” an asset class driven as much by emotion and personal appreciation as by financial returns.

During periods of instability and economic uncertainty, investors often seek refuge in hard assets, tangible stores of value that are less correlated with traditional financial markets. While gold has historically played this role, gemstones, both cut and uncut, are increasingly recognized as alternative stores of wealth. Their portability, rarity, and intrinsic value make them particularly attractive in an environment marked by inflation, currency depreciation and market volatility.

Renowned Singapore-based investor and Quantum Fund co-founder Jim Rogers, known for his contrarian investment strategies and bullish views on Asia, tells The Asset: “Buying stones before they are cut is a great investment, as long as the underlying value is there. But one needs some expertise to know what one is seeing. I do not have the expertise.”

The market for gemstones, particularly high-quality rare stones, such as Burmese rubies, Kashmir sapphires and Colombian emeralds, has demonstrated strong resilience, often serving as a hedge against inflation and currency depreciation. Global auction houses continue to see record-breaking sales of investment-grade stones, reinforcing the notion that the finest quality gems can appreciate significantly over time.

The recent Knight Frank Luxury Investment Index highlights the growing appeal of precious stones, diamonds and coloured diamonds as passion investments. While coloured diamonds saw a slight decline in 2024, dropping by 2.2%, they still maintain a strong 10-year growth rate of 3.8%.

This trend suggests that, despite recent fluctuations, coloured diamonds continue to perform well over the long term, making them an intriguing option for investors seeking both aesthetic and financial returns. The broader jewellery sector, which also includes diamonds, saw a moderate price increase of 2.3% in 2024, reinforcing the ongoing demand for high-value precious stones.

Appeal of uncut gemstones

In Asia, the investment landscape is also expanding beyond cut and polished stones to include uncut ( rough ) gemstones, which present a different investment dynamic. While cut gemstones are valued based on clarity, cut quality and carat weight, rough gemstones are more speculative. Their value can fluctuate significantly depending on how they are cut and processed.

Against the current backdrop of geopolitical disruption and tepid growth forecasts, could uncut gemstones emerge as a passion investment that defies market trends?

Investing in uncut gemstones requires expertise, as the transformation from rough to finished stone can greatly impact the final value. Furthermore, rough gemstones are less liquid than their polished counterparts, as the buyer pool is often limited to dealers and manufacturers rather than private collectors.

Despite these challenges, uncut gemstones appeal to those who wish to engage more directly in the supply chain, particularly as demand for ethically sourced stones grows. Investors interested in sustainable and responsible mining may find rough stones attractive, as they can trace the provenance and work with reputable cutters to maximize value.

With emerging technologies in gem cutting and increasing transparency in gemstone certification, uncut gemstones could present an intriguing long-term investment play, albeit one requiring more active management and industry knowledge.

Market hedge with historical resilience

Traditional financial assets, from equities to bonds, are repeatedly subject to sharp price swings during periods of geopolitical uncertainty. Gemstones, however, are not directly tied to financial markets, making them a valuable diversification tool. While liquidity in the gemstone market is not as immediate as stocks or gold, auction house data shows that demand for rare, investment-grade stones remains strong even during economic downturns.

The Asset recently spoke with Walter Wee, CEO, and Kevin Howe, general manager, of the RegalRare Gem Museum in Singapore, an exclusive private museum showcasing record-breaking and rare gemstones valued at over US$1 billion.

The institution leverages blockchain to ensure secure authentication and provenance of rare gemstones, enhancing transparency in gem trading. It also plans to launch its own digital platform later this year and is exploring fractional ownership of uncut and rare gemstones.

“There is no doubt that cut and polished gemstones have greater liquidity than uncut and unpolished ones,” Wee says. “However, uncut gems should be positioned as heritage and long-term assets, complementing an ultra-high-net-worth individual ( UHNWI )’s portfolio for legacy wealth. For example, we receive requests for gems with the potential to be lodged as Guinness World Records, ensuring that the title and prestige remain permanently associated with the owner or founder.

“Another aspect of liquidity and value appreciation lies in an uncut gem’s ability, when of a certain valuation and quality, to be accepted as collateral for financing. If an owner can convince a liquidity provider of the asset’s long-term value, these gems can serve as security for projects requiring funding. Historically, coloured gemstones have shown consistent appreciation, increasing in value by an average of 3% to 5% annually, making them a compelling store of wealth.”

Technology driving transparency, value

The increasing assurance of the probity of uncut gems and their rarity also contributes to their appreciation. In the past, equipment and testing facilities were limited to certain countries. Today, technological advancements have significantly improved the ease of cross-border verification via accredited third parties.

Uncut gemstones are now authenticated through precise measurement, specific gravity testing and advanced spectroscopy. Techniques like Fourier-transform infrared spectroscopy detect impurities and structural characteristics, identifying treatments or enhancements. Meanwhile, ultraviolet-visible-near-infrared spectroscopy analyzes how a gemstone absorbs light across different wavelengths, revealing information about its colour origin and whether it has been treated or naturally formed.

Additionally, microscopy examines inclusions, ultraviolet light detects treatments, and Raman spectroscopy verifies a gemstone’s identity. Together, these methods ensure accurate classification, preserving both authenticity and market value.

Independent hedge

Uncut gemstones offer an additional layer of potential value creation. Since the final worth of a rough stone is unlocked through the cutting process, investors with access to expert lapidaries can capitalize on the transformation of rough material into high-value finished gems. Additionally, demand for ethically sourced rough stones is rising, as collectors and institutions place greater emphasis on provenance and sustainability.

Throughout history, gemstones have been used as a crisis asset, whether as a means of wealth preservation during war, political upheaval or hyperinflation. Unlike digital assets, which depend on infrastructure and regulatory stability, gemstones remain a physical store of value that is independent of government intervention.

“The demand for uncut gemstones has evolved into a passion investment for UHNWIs,” Wee states. “They now appreciate the ability to buy, at a very reasonable price, into a coloured gem that sees general asset value appreciation and has the potential for exponential growth due to instabilities in the broader market.”

However, he notes that the percentage of assets UHNWIs allocate to uncut gemstones remains small, on average, just 1% to 3% of their net worth, compared with other alternative asset classes.

Alternative assets, such as art, vintage watches, rare wines, whiskies and collectible cars, have long been established in the market. However, with the rise of blockchain technology and its increasing ability to securely verify and host assets, many second- and third-generation UHNWIs in Asia are expanding their collections to include uncut gems.

Given the current climate of geopolitical uncertainty, supply-chain disruptions and inflationary pressures, gemstones, both cut and uncut, offer a credible case as an alternative asset.

And while uncut gemstones require expertise to navigate, their rarity, portability and resilience to financial market fluctuations make them a strong consideration for investors looking to diversify their wealth outside of traditional asset classes.