THAT nervy investors pile into gold is well known: the price of the yellow metal breached $1,900 an ounce again this week. But growing numbers are also venturing farther afield, into gemstones such as rubies, sapphires and emeralds. Although coloured stones are a hotch-potch of an asset class, anecdotal evidence points to surging values.

Dealers say prices for high-quality rubies are up by 50% this year and have doubled in the past two years. Top-notch sapphires that in 2009 would have fetched $65,000-80,000 per carat (a unit of mass equal to 200 milligrams) now change hands for $150,000 or more, says Joe Menzie, a former head of the International Coloured Gemstone Association. In a recent auction to wholesalers, African emeralds sold for 63% more per carat than higher-quality stones fetched last December. Even stones of average quality are up by 20-25% this year, says one dealer. The boom has also boosted semi-precious stones, such as rubellite and red spinel, worn by those who can’t quite stretch to a ruby. “Some semi-precious stones are now priced as if they were precious,” says Guy Clutterbuck of CGM, which sells to retailers.

There are several forces driving the price rises. The strongest is surging demand from faster-growing economies, particularly China and India. Both countries have a long-standing passion for coloured stones, some of which are seen as bringing good luck (yellow sapphires in Hinduism, for instance). Their new rich flaunt them as status symbols at dinner parties in Shanghai and Mumbai. One American dealer reports difficulty getting hold of tanzanite, a blue semi-precious stone. He can sell it for $300 per carat and will thus pay up to $280, but cannot compete with Chinese wholesalers willing to pay $350 so they can sell to domestic clients for $400. A contributing factor is the rise of the yuan against the dollar, the denominating currency for gemstone prices.

A second force is economic insecurity. Like gold, gemstones are seen by some as a tangible store of value in turbulent times. Dealers are increasingly being asked to put together collections for wealthy Americans who want to diversify away from paper investments. “Wall Street types are reading the auction results and picking up the phone,” says Edward Boehm of RareSource, which buys stones from mines.

A third factor is supply shortages. Unlike the artificial constraints imposed on diamond supply by big sellers, gemstone shortages are real. Good-quality coloured stones are hard to find in the ground at the best of times. The outfits digging for them tend to be tiny compared with the diamond giants: one of the biggest emerald miners, Gemfields, has a market value of just $66m (though it is growing smartly). “It is much more a business of mavericks” than diamonds is, says Mr Clutterbuck. Local politics have contributed to shortages. In 2008 America banned imports of gemstones from junta-ruled Myanmar, a major source of rubies. Madagascar has sapphire deposits but its politics are dysfunctional and its infrastructure poor.

Celebrity endorsements give another, albeit fleeting, boost. Demand for blue sapphire rocketed in America when Prince William proposed to Kate Middleton with a sapphire-and-diamond engagement ring, says Douglas Hucker, head of the American Gem Trade Association.

Can the boom continue? Optimists argue that coloured stones are catching up with diamonds (which have not enjoyed the same price rises lately) in terms of cachet. This would be a restoration of former glory: coloured gems were recognised as valuable centuries before anyone cared for diamonds, points out Ian Harebottle, chief executive of Gemfields, but in the 20th century diamonds took over, thanks largely to shrewd marketing. He thinks coloured gems could be “superstars” if their rarity is marketed just as cleverly. It should help that investors have growing opportunities to resell via specialist auctions.

But buyers need to be careful. Coloured stones vary hugely in quality. The grading system is less sophisticated and more subjective than that for diamonds. Tales of buyers (and banks that accept stones as collateral) getting burned abound. A newcomer can easily be fooled into believing a Sri Lankan sapphire is a more valuable one from Kashmir. Unscrupulous dealers have been known to shove duff stones into the types of collection now being bought by Americans.

Even with hand-holding from an honest expert, buyers face risks. Coloured-gem prices have jumped and slumped before. A decade ago, emerald prices tumbled after a well-known jeweller was sued over a flawed stone. If Asian buyers retrenched, current prices would look hard to justify. But if prices do crash, a ruby can at least be worn to the theatre. A share certificate doesn’t even make good toilet paper.