Prices for investment grade art and antiques have increased substantially over the last 15 years. This phenomenon has left market watchers with a bit of a conundrum however. These price increases have occurred against a generally hostile backdrop. For one, the global economy has been stuck in a rut of perpetually disappointing growth since the Great Financial Crisis of 2008-2009. This sluggish GDP and income growth should have a suppressive effect on the demand for most goods, including antiques.
You would be hard pressed to see it though. Prices for investment grade antiques have risen by a factor of anywhere from two to four times since the turn of the millennium. Interestingly, at exactly the same time as this asset class was skyrocketing, its close cousin – the collectibles market – fell off a cliff. While this development might shock some casual observers, it shouldn’t. True investment grade antiques, invariably crafted from the finest materials by the best artists of the age, are very different from mere collectibles.
This is an incredibly important distinction. Investment grade art and antiques possess five crucial attributes: portability, high quality construction and materials, durability, scarcity and zeitgeist. All antiques that don’t meet these criteria fall into the collectibles category. This means your aunt’s treasured miniature porcelain cats are considered collectibles while the Duchess of Windsor’s famous gem encrusted panther bracelet is considered investment grade jewelry. Collectibles, as you can probably guess, are almost universally terrible investments.
In any case, we are left with a nagging question. If the economy has been so rough for the average man on the street, why have investment grade antiques appreciated rapidly across the board? It would be understandable if it was only multi-million dollar trophy art that had skyrocketed in value (and it has, but that is another story). But why have very affordable investment grade pieces costing only a few hundred dollars each increased in value so quickly?
I have observed this phenomenon again and again as I’ve researched different areas of the antique field. The story is the same regardless of whether I looked at ancient Greek silver coins, vintage European chronograph wristwatches or antique Edwardian diamond jewelry. They have all risen dramatically in price over the last 15 years.
I think one answer is that bullion prices have increased significantly since 2000. In that year silver traded for around $5 a troy ounce, gold stayed under $300 a troy ounce and platinum hovered between $500 and $600 a troy ounce. Today, in mid 2016, those same prices are $20, $1,320 and $1,100, respectively. This represents an increase of between two and four times, depending on the precious metal in question. Many investment grade antiques contain precious metals, so it is only reasonable that their prices would be driven in part by the appreciation of their component materials.
A similar situation has unfolded in the colored gemstone market. The big three colored gems – rubies, emeralds and sapphires – are all considerably scarcer and pricier now than they were 10 to 15 years ago. Second tier gemstones like tourmalines, fancy garnets, beryls and spinels used to be ignored as too pedestrian. Now that supplies of good quality rubies, emeralds and sapphires are dying up, these beautiful, but formerly neglected, second tier stones are metamorphosing into gem superstars. So any investment grade antique that incorporates precious stones has, predictably, shared their price appreciation.
But even the across the board price increases in luxury raw materials can’t completely explain the skyrocketing value of investment grade antiques. There are other factors at work as well and I believe scarcity is one of those factors.
There is a growing realization in the marketplace just how limited the supply of good investment grade antiques is. They are rare – very rare. It simply isn’t enough for an object to be old, interesting or quirky for it to be considered investment grade. A good rule of thumb is that in any random accumulation of antiques perhaps only 0.1% will qualify as investment grade – and sometimes even less! This makes these miniature works of art incredibly rare. But just how rare is something we are still finding out today. Once investors became aware of this extreme scarcity, prices were bound to rise.
Global investing conditions have also contributed to the inexorable ascent of investment grade antiques. Since the year 2000 the world has suffered a series of financial crisis, each progressively larger and more destabilizing than the previous one. Central banks have generally responded by forcing interest rates down to zero – or, in some cases, below zero. This makes cash an undesirable place to store long term savings.
Average people who just want a safe place to put their money have become increasingly disillusioned with the obvious volatility and risk inherent in traditional paper assets. But there are few true alternatives to stocks, bonds and cash. Art and antiques, along with precious metals, provide some of the only asset classes that are beyond the direct control of increasingly unhinged central bankers.
I think these reasons explain why investment grade antiques have appreciated so steadily over the past decade while turmoil has dominated most other markets. Perhaps even more importantly, I don’t foresee these trends reversing anytime soon. I believe the prices of precious metals and gemstones will continue to rise. Good quality art and antiques will continue to become ever scarcer. And demand from savvy investors looking for a safe haven will continue to increase. Those who ride these trends will make money. Those who don’t will ultimately wish they had.
