Commodities: Rock of ages, value changeable

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THIS may be the year that you decide to buy a significant piece of jewellery for a loved one, or for yourself. But once you've made the decision to part with the money, selecting jewellery is not as straightforward as it might seem.

You must consider cost, design, size of stones, which precious metal they should be set in, and the quality of the work and materials. Perhaps most important, you want to be assured that what you buy will be a good, long-term investment.

You may ask what makes a sound jewellery investment. Oddly, the organisations that market precious metals and gems, such as the World Gold Council and De Beers, the diamond cartel, do not recommend jewellery as an investment.

This may be because it is illegal to give investment advice in the UK without authorisation. But their position is that once a precious metal or diamond is transformed into jewellery, the subjective appeal of fashion alters its value forever.

The resale price of a given piece sometime in the distant future will depend on fashion trends and the vagaries of the jewellery marketplace, so it is impossible to predict. If you decide to sell your treasure, you are gambling that its design is going to be popular at that particular time.

A De Beers spokesman says of a piece of diamond jewellery: 'It isn't an investment, and it shouldn't be considered as such.' The only advice De Beers gives is to buy it because you like it.

But what about Elton John, who last week sold part of his jewellery collection at a Sotheby's auction - including diamond-rimmed specs, diamond-encrusted brooches, a gold pendant, a diamond ring - and received pounds 750,000 for the lot? It's most unlikely that investment value did not occur to anyone attending that sale.

Obviously, some jewellery bought in the past has proved to be a good investment for its owner. John Pyke, chairman of the National Association of Goldsmiths and owner of Pyke & Sons, jewellers in Liverpool, says the demand for antique jewellery is far greater than the supply. Albert watch chains, long gold key chains, and Edwardian diamond set jewellery are especially popular.

John Benjamin, director of international jewellery at Phillips, the auctioneers and valuers in Bond Street, says that prices in old stones and jewellery at the top end of the market are very robust: 'In 1994 and 1995, period jewellery will probably be the leading commodity in the sale rooms.' He reckons that jewellery fashions are returning every 30-odd years. In other words, save those heavy white-gold pieces from the 1970s.

What few retailers advertise is that new jewellery prices reflect the highest value a piece is ever likely to have. As with a new car, once most jewellery is taken out of the shop its value depreciates.

At auction houses like Phillips, however, because both the jewellery trade and the public are buying and the items for sale are not new, prices can be lower than the equivalent retail prices. Phillips holds monthly jewellery auctions, where prices start at pounds 200 but can exceed pounds 50,000.

In reality, most people never do sell their good jewellery, because it becomes personal to them and they want to keep it in the family.

But if you do, timing is everything and you may be disappointed. Let's say you want to sell Aunt Martha's ruby necklace from the 1950s. A jeweller's offer will depend on his supplies, how the style of the piece fits in with his other merchandise, how long it will take to sell, how much he can make on it, and the weight and quality of the gems and metal.

One buyer who found a small, gold diamond ring last spring found the market highly variable. He took it to several jewellers to see what price he could get for it.

In London's Bond Street, two or three jewellers offered him pounds 100 to pounds 200. In Hatton Garden jewellery district in east central London, four or five places offered him between pounds 150 and pounds 200. But when he took the ring to Bournemouth, two shops offered him pounds 325 and pounds 400.

But the intrinsic value of the raw materials in jewellery means that the piece will always hold some value if it remains in good condition. The higher the carat, or weight, the higher the value.

Since there are no guarantees on the lasting value of new jewellery, a potential buyer should:

Buy jewellery from a reputable, established and professional shop.

Compare prices in several shops and inquire about quality and colour. It will help you to make the best purchase.

Buy something wearable. It will stand the test of time better.

Buy the best quality you can for the price you can afford.

Mr Pyke says: 'You should buy it because you like it . . . But it may be that in the fullness of time, it's a winner.'

(Photograph omitted)