At first glance, the auctioning of diamonds might seem unimportant, and record-breaking proceeds just the price ultra-high-net-worth individuals are willing to pay to dump excess cash. But Swiss Style’s Lauriane Zonco spoke with David Bennett and discovered a few gems.
Apacked room in a plush Geneva hotel salon, crammed with chairs and standing people. TV cameras in every corner, mobile phones held high up in the hope of getting a picture of what is actually happening at the front of the room. The sense of anticipation is palpable and the never-ending whispers clearly signal that something big is about to happen. Yet, deceptively, all eyes are set on a man in a suit standing in front of this eager audience. He is calm, collected, his speech is even. Yet what is happening at this very moment is, in the words of Christie’s chief auctioneer, Christopher Burge, “a real coliseum waiting for the thumbs. They want a total disaster, lots of blood – or they want great excitement, lots of laughs, a happy night at the theatre.”
The man in the suit looks back and forth at the audience, and rattles off numbers, each bigger than the previous one. As his pace accelerates, the whispers in the room turn into loud chattering of amazement, nervous giggles are heard, and then suddenly everybody freezes as the pleasant man in the suit bangs down his gavel with a sharp, almost violent gesture. He utters one last figure, and the packed room breaks into applause. This show had a very happy ending indeed, and not a single drop of blood was shed. But victory has its price and on that night it came with a tag of USD 46.2 million. Welcome to a not-so-unusual evening in the life of David Bennett, chairman of the Jewellery Department for Europe and the Middle East at the famed auction house Sotheby’s.
Rock of ages
On that night, 16 November 2010, Bennett and his team obtained a record sum in the titillating world of auctions. In a few hours, the Sotheby’s Magnificent Jewels sale brought in an unprecedented sum of USD 105 million, almost half of which was raised by a single item, a 24.78 carat fancy intense pink diamond that will now be known as the “Graff Pink”. Its buyer, London-based jeweller Lawrence Graff, was indeed granted the privilege of naming the fabulous stone, one of the perks that comes with purchasing a USD 46.2 million item. As dizzying as they may be, these sales figures are becoming less and less exceptional in the world of high jewellery auctions. Beyond media-pleasing stories such as the one that saw Georges Marciano, founder of the Guess jeans empire, pay a cool USD 16 million for a white diamond for his 12-year old daughter Chloe at Sotheby’s Geneva in 2007, high-powered jewellery sales are indeed thriving. This is not frivolous business. Rather, it is now seen in expert circles as an interesting investment opportunity in the face of a volatile stock market. For Bennett, it is no surprise. For this Englishman, who originally studied philosophy – a subject he still holds dear to his heart – jewels and gemstones are much more than just aesthetically pleasing decorations. An encounter with him helps shed some light on the enduring and growing appeal of high end jewellery.
A touch of gold
One does not sell stones whose age is counted in millennia in the same way used cars are sold. For this delicate task, Sotheby’s deploys David Bennett, who joined the company in 1974 and has since been intimately involved with all the famous collections of jewellery sold by the famous auction house over the years, such as the Jewels of the Duchess of Windsor, the Ava Gardner Collection, and the jewels of the Begum Aga Khan. An internationally recognised authority in the field of precious stones and jewellery, Bennett has been nicknamed the “100-carat man” ever since he managed the sale of the only three 100-carat perfect white diamonds ever sold at an auction. And last November, he added the all-time record jewellery sale to his already well-garnished CV. These remarkable achievements are all the more impressive since Bennett never even thought of a career in the jewellery business, but rather came to it “almost by accident,” as he likes to put it, through one of his father’s friends who was working for Sotheby’s at the time and encouraged him, then a young graduate in philosophy, to “give it a try”.
The jewellery sales have been thriving under his leadership. Even the recent 2008 financial crisis could not stop the momentum. On the contrary, as the crisis deepened in May 2009, Sotheby’s achieved record prices for coloured diamonds. Bennett has a few explanations for this apparent contradiction. Emerging markets account a lot for growth in sales at auctions houses such as Sotheby’s. As Bennett points out, “the last ten years have seen a huge diversification in the geographical origins of high jewellery buyers.” This horizontal expansion means that at the November sale, the pink diamond went to British jeweller Lawrence Graff, but “the rest of the lots went to buyers originating from over 30 countries,” he explains. “The internet has been a catalyst in giving access to the auction house’s catalogue to those new buyers,” he says, while a rapid increase in the size and purchasing power of the middle and upper classes in countries such as India mean they can actually buy what they see – and keep pushing the prices upwards. As a consequence, Sotheby’s, which used to have offices in “classic” locations such as London or New York, is now organising exhibitions around the world, in new jewellery markets such as the Middle East and Asia.
And whereas the famous auction house prime target used to be knowledgeable jewellery dealers, its stones now attract individual buyers worldwide. In particular, Bennett sees India as a market full of potential, “thanks to the size of its middle class and its firmly rooted affection for fine jewellery and precious stones. Russia has also been a healthy market for Sotheby’s for some years now, while South East Asia continues to grow. Japan and China, which used to be niche markets for jade and Chinese art, and with no tradition of fine jewellery, are fast becoming exceptional markets through wealthy individual buyers,” he says. All good news for Sotheby’s, whose 2010 jewellery sales totalled a record USD 405 million.As for 2011, the prospects are exciting as the economy lurches along.
David Bennett also sees the rarity of the pieces brought before the eyes of the potential buyers as a reason for this market’s success: whether newly mined or part of often fascinating legacies, the top stones put up for auction by Sotheby’s are truly one of a kind. “When you look at those stones,” enthuses Bennett, “you really look at one of the oldest and most inaccessible things on the planet”. Gemstones, especially the exceptional ones sold by Sotheby’s, take millions of years to form, and their mining and extraction is a long, costly, and in a lot of cases, random business. As The Gemological Institute of America (GIA) points out, of the millions of diamonds mined each year, only 0.001% can qualify as fancy colours and only a handful can achieve the top grades of Intense and Vivid. An even smaller percent are larger than one carat, let alone five carats. Sotheby’s really deals with “true rarities,” says Bennett, which explains their investment appeal. He feels “extremely privileged to sell such exceptional stones”. In the case of the 100-carat stones that made him famous, “each had been mined six or seven months before, got polished and then came straight to us.”
Bennett’s task, as he sees it, is also to shed the best light on stones that have risen from complete obscurity to worldwide fame almost overnight. “From the catalogue, visits by the potential buyers, all the way to the stone’s presentation, you really want to make the process special.” The excitement is always present in Bennett’s voice. In fact, he is such a passionate character that, in a bold move, he even left Sotheby’s in 2000 to pursue his other passions, philosophy and hermetic astrology. He came back to the company in 2004, only to break record after record during auctions: “Auctions of stones like this are always exciting and a personal favourite. The Graff Pink is one of the most, if not the most, exceptional stone I have seen in my life, and I had been after it for some time.” When the stone, last seen 60 years ago when it was bought from famous jeweller Harry Winston, finally made it to Bennett’s desk, he knew he had a record-breaker in his hands.
Heart of stone
Bennett offers a third explanation for the growing success of fine jewellery sales: “Fine jewellery has universal appeal because of the emotional aspects tied to it.” As the co-author of the bestselling reference work Understanding Jewellery, which has been in print since 1989, Bennett knows what he is talking about. “People all over the world are fascinated by gemstones, whether they have a tradition of jewellery, such as in India, or only recently came to it, as it is the case in Japan and China.” Jewels hold more than just monetary value: gemstones often have fascinating stories, either because they are a natural rarity, or because they are part of extraordinary estates, or a mix of both.
Bennett, who was been in charge of the sale of world famous jewel collections such as the Ava Gardner collection, sees this emotional component in jewellery as a driving force behind the success of those extraordinary sales: buyers are purchasing a slice of history, and add their own personal family legacy to the course of a stone’s life. And it is not only aesthetically pleasing, it is also financially rewarding, a combination, according to Bennett, guaranteed to conquer all markets. In 2007, an emerald and diamond bracelet, gift to the Duchess of Windsor in 1935 from Edward, Prince of Wales, sold for CHF 1,141,000, which was well above its estimated going price of CHF 720,000–850,000. This was three times the price it had fetched when it was last seen in 1987, when Sotheby’s sold it as part of the Jewels of the Duchess of Windsor sale. This sounds like a very nice tale indeed – beautiful, exceptional stones and pieces of fine jewellery attaining record prices because they are seen as a sound investment when the stock market can crash anytime. All the better if the investment adds some sparkle to your portfolio. But, as the price of gold reaches unprecedented highs, there may be yet another story behind this seemingly unstoppable love story between buyers and fine jewellery.
The market for commodities is currently on a bullish trend, and this is particularly true for gold and silver alike. As the French newspaper Le Monde pointed out a few days after gold had reached an alltime high in April, “investors are going old-fashioned these days. They are turning their backs on highly sophisticated financial products and are instead flocking towards one of the oldest product one could find.” The gold stock market value increased by 29% over the course of 2010, each time breaking a new record, and has recently gone over the symbolic USD 1,500 limit. Silver – the value has never been so high in the past 30 years – is witnessing the same trend. Considered as a safe and sound investment, gold is often overlooked in knowledgeable circles as it lacks the strange appeal of complex financial investments. However, in times of economic hardship, gold has an interesting competitive advantage: it is a very tangible, very real asset, a definite plus now that the 2008 financial crisis has reduced many sophisticated financial products to a large pile of nothing.
The inflationist policies put in place by numerous central banks in the aftermath of the 2008 financial meltdown have pushed investors towards gold as most currencies became weaker and weaker. In times of an unprecedented weak US dollar, gold is proving attractive as a protection against fluctuating currencies. In the words of a trader based in Geneva, “gold is almost becoming a currency itself,” albeit one that will not simply be worth nothing if the economy goes belly up. Investing in something very real and very tangible is seen today as a good strategic move, but this goes beyond sound financial strategy. As Le Monde put it, the rise in gold value is also the result of a “spreading distrust for key elements of the global economy,” starting with states and central banks themselves: states obligations do not appear as a safe investment anymore since the bankruptcy of middle- and high-income countries became a very real scenario. Gold looks much more trustworthy to investors: you cannot print it to pump liquidity into the economy, you cannot play with it the way some states have played with their currencies to alleviate the financial crisis. Even central banks themselves, in the face of an ever depreciating dollar, are trying to diversify their reserves by buying gold. For the first time since 1988, central banks bought more gold in 2010 than they sold. It was only a matter of time before this pull towards gold and tangible assets was going to spread to the public. And since the 2008 financial crisis showed that real estate can be risky as well, gold is fast becoming the ultimate value for connoisseurs and the public alike. The frenzy is spreading fast and everywhere, and particularly to the rich in developing economies: Le Monde reports that gold imports in China multiplied sixfold in 2010.
Fine jewellery and the auction houses that bring them to the world are certainly gaining from the benefits of the current pull towards commodities and gold. As for diamonds and gemstones, their stock value does not fluctuate as much as the value of gold, as the Antwerp-based trading diamond house Baunat explains in their online FAQs: “If you look at the price of diamonds over 100 years, you’ll notice it increases by the index value. This means that, on average, diamonds aren’t the best investment, but that they keep their value. There are exceptions for certain categories and certain periods. The value of naturally coloured diamonds rose spectacularly at some times, because they are becoming true natural rarities. All big mining companies continuously weigh the costs of their exploitation and the expected demand from the consumer. If they expect a lower demand, they’ll anticipate by reducing the amount of diamonds they dig up, avoiding digging in the most difficult places where costs are higher… And one doesn’t even talk of mining explorations anymore. The mid-term effect will be a substantial decrease in the offer, causing a small shortage of raw diamonds and leading to an increase in price.” All of which looks very promising for successful gemstones and fine jewellery auction sales.
A market for raw materials
A Geneva-based jeweller and owner of a well-known brand, who requested anonymity, offers another explanation for the appeal of jewellery auction sales: “Auctions let buyers buy at much more interesting prices than retail. It is still very attractive for dealers who can get good to exceptional stones at a still attractive price. They can then recut them the way they want to, or are requested to do so by specific customers, since tailormade pieces are what actually gets most cash back for retailers. Obviously during an auction, you do not benefit from the negotiation power that you have if you buy gold or stones at fairs, but the prices are still lower than at fairs, and the stones can be exceptional.”
And what is the advantage of buying at auctions for individual buyers, since this category of buyers was absent from auctions only a few years ago and are now buying exceptional lots? One art-dealer who frequently buys at auctions explained that “for individuals with sizeable means but limited knowledge of gemstones or jewellery, big auction names like Christie’s or Sotheby’s offer a quality guarantee that is at the same time reassuring and pushes potential buyers’ excitement level up and up.” Buying at Sotheby’s or Christie’s has “the same aura now than buying at Cartier or Van Cleef”. For the individual buyer who wants to venture into tangible asset territory, well-known auction houses are becoming the first stop on the road to investment diversification.
So the future of jewellery and precious stone auctions is looking rosy, as it were. The sales involve good to exceptional quality pieces, they are attracting strong investors and the attention of a public in search of concrete assets that will retain their resale value long after stock markets have crashed. And there is the general defiance for complex investment schemes. Tales of fine jewellery pieces being transferred from generation to generation, and of fantastic stones that are the stuff of museums are certainly spawning enthusiastic media coverage. It is tempting to assume from these dizzying sales figures that the world economy is recovering very fast from its last financial crash. Those figures, however, may also be a sign of the persisting defiance and mistrust of the usual financial instruments that push investors and the public alike towards new investments that are perceived as safer and more transparent. Investors, individual buyers and dealers alike may well feel safer with assets in the form of exquisite pieces of fine jewellery and giant diamonds. And that, in turn, might be a sign of the emotional instability of the world economy. Either way, the atmosphere at David Bennett’s Sotheby’s office is the one thing bound to remain cheerful for some time.
Confirming David Bennett’s insight, potential investors seized the opportunity to get their hands on very real assets when the famous auctioneer chaired another major Sotheby’s fine jewellery sale on May 17. The auction house sold the most valuable emerald and diamond tiara to have appeared at auction in over 30 years. The tiara, estimated to go between USD 5 to 10 million, was commissioned around 1900, possibly from the renowned jewellers Chaumet, by Guido Count von Henckel, Prince von Donnersmarck, for his second wife Princess Katharina. The jewellery collection of the Donnersmarcks was known to be on a par with, or even to have exceeded, those of many of the crowned heads of Europe. Six bidders competed for the tiara, which ultimately went for USD 12,736,927, the highest price ever achieved for a tiara at auction. The price it fetched also represented an auction record for a piece of emerald jewellery. The entire sale totalled USD 89,121,687, well above the estimated USD 47.3–77.9 million. It was a Tuesday night like any other at Sotheby’s…
Bennett in seven dates
- 1973 – Graduates in philosophy from Nottingham University
- 1974 – Joins Sotheby’s jewellery department
- 1995 – Earns the nickname of “100-carat man” after spearheading the sale of the only three 100-carat perfect white diamonds to have been sold at auction
- 1997 – Becomes Deputy Chairman for Sotheby’s Europe
- 2000 – Leaves Sotheby’s to continue his philosophy studies
- 2004 – Comes back to the auction house as consultant
- 2006 – Appointed Chairman of Sotheby’s Jewellery Department for Europe and the Middle East
- 2010 – Breaks a new record for Sotheby’s through the auction and sale of a pink 24.78 carats diamond for over USD 45 million
Article by Lauriane Zonco