Jeweller - June 2021

Editor’s Desk
What it’s really worth
The recent auction of the Sakura Diamond at Christie’s was reported to be both ‘disappointing’ and ‘record-breaking’
– so which was it? ARABELLA RODEN explores the complex factors that determine value.
Fancy colour diamonds are one of the
jewellery industry’s most fascinating
categories. Like a work of art, their appeal
is undeniable – yet entirely subjective.
One person’s dream champagne diamond
engagement ring is another’s cheap
brown stone.
A wise person once told me that things are
only “worth” what someone else is willing
to pay; that’s as true for diamonds as it is
for Australian houses!
Beauty is in the eye of the beholder, and so
is value.
Nowhere was that subjectivity more
obvious than in the headlines surrounding
the auction of a particular pink diamond
last month.
In May, a fancy vivid purple-pink stone,
poetically named the ‘Sakura Diamond’
after its cherry blossom hue, was
auctioned at Christie’s in Hong Kong.
An exceptional diamond, internally flawless
and weighing in at 15.81 carats, breathless
headlines predicted the Sakura could sell
for $US38 million, amid feverish demand
for pink stones that has eclipsed even the
Sydney housing market.
The hype was – as they say – real.
Yet, the bidding opened at $US20.6 million
and rose to a paltry $US29.3 million when
the auctioneer’s hammer finally fell – a
king’s ransom to some, but well shy of
expectations and/or predictions.
Still, the result comfortably eclipsed
the $US26.6 million record for the most
expensive purple-pink diamond ever sold at
auction; that title was previously held by the
Spirit Of the Rose, a 14.83-carat specimen
sold by Sotheby’s in November 2020.
Dutifully, the headlines proclaimed the
exciting news of a record broken; hailing it
is as further proof of the robust health of
the fancy colour diamond market.
Yet, on the very same day, other headlines
declared the result “disappointing”.
Why? It’s all a matter of perspective.
Those who used the benchmark of the
previous record were overjoyed, viewing
the result as confirmation demand for pink
diamonds – and ultra-luxury jewellery –
remains strong, despite a challenging year.
Meanwhile, those whose expectations were
shaped by hype and high estimates – the
latter often being used to generate the
former – were left underwhelmed.
Some even speculated that the COVID-19
pandemic had “seriously weakened” the
fancy diamond category overall.
There are several lessons to be learnt from
this tale.
The first is that auction prices have never
been a particularly accurate yardstick for
the health of any jewellery category, and
especially not fancy colour diamonds.
The types of stones that end up under
the hammer at Christie’s and Sotheby’s
are in a category of their own, with very
few available each year, and purchased
by a select handful of collectors and
jewellery houses.
As much as tech billionaire Mike
Cannon-Brookes snapping up Point
Piper’s Fairwater estate – once owned
by Lady Mary Fairfax – for $100 million
tells us nothing about the average
Australian mortgage, or housing
affordability in general.
It’s a trap often seen in the art world,
where journalists will measure the
‘strength’ or ‘weakness’ of the auction
season by comparing the aggregate
of final sales prices against aggregate
pre-sale estimates.
If the sales match or exceed the estimates,
the market is declared robust; conversely
if they are at the lower end or below
estimates, the market is in decline.
Yet auction estimates are not tethered
to external economic factors, but rather
calculated based on the reserve, or what the
seller is willing to accept.
Some of this can be a product of careful
market analysis, but it may be equally
A wise person
once told me
that things are
only “worth”
what someone
else is willing
to pay; that’s
as true for
diamonds as it
is for Australian
houses! Beauty
is in the eye of
the beholder,
and so is value.
weighted by psychology and intuition.
Competition from other businesses
can also incentivise auction houses to
inflate the estimate in the hope of
winning the account. However, a higher
range can discourage potential bidders.
Lower estimates entice bargain hunters
into the fray – and any resulting bidding war
could push the final sale price far higher
than the estimate, which makes the auction
house seem more impressive.
For these reasons, it’s impossible to
say whether the Sakura Diamond was
‘overvalued’, as ‘value’ by its very nature
is subjective.
The second lesson is that those
who manage their expectations are
rarely disappointed.
Healthy anticipation is all well and good,
but when expectations are formed based
on assumptions, emotions, and opinions
– rather than facts – it’s easy to be caught
off-guard when things don’t go as planned.
And when expectations aren’t met, we
can be led to the wrong conclusion.
To combat the ‘expectation gap’, it’s
important to utilise perspective; no
situation occurs in a vacuum, and
understanding context is key.
Yet perspective is often the first casualty
of hype, especially when stuck in a bubble
or echo chamber, when it can be difficult
to separate the factual from the fanciful.
In the case of the Sakura Diamond,
reading all the headlines provided the
necessary perspective to contextualise
the result.
When it comes to unique gemstones,
rather than beauty being in the eye of the
beholder, perhaps we should say beauty
is in the eye of the believer – after all,
people’s hearts tell them what to believe,
not what to do!
Arabella Roden
Editor
June 2021 | 17