If we believe the hype, everything from fitness, time pieces, messaging and payments are about to be disrupted by the launch of the Apple Watch. One area many would have deemed safe from the device is the old fashioned gold business.
Yet gold bugs are alight with hopes that Apple will transform the gold business as well. Soon after Apple announced a launch date for the ultra exclusive Apple Watch Edition – the gold one – the internet flourished with speculation gold demand would rise as a result.
Early speculation suggested each Edition version of the watch would contain two ounces of gold and sell 10m units a month. At those sort of volumes, more 700 tonnes of gold a year would be needed to meet expected sales; about a quarter of annual gold production. With such a significant new driver of demand, gold bugs argued the price would have to rise sharply.
Let's take breathe and examine the facts. A top of the range Rolex contains about two ounces of gold and sells for well in excess of US$20,000. The average gold watch might contain a few hundred dollars worth of gold, perhaps half an ounce. And that is metal weight. To make gold usable on a wristwatch would require alloying it with another metal so total weight will never equal the weight of gold.
The sales projections also appear ludicrously high. Rolex sells about 750,000 watches every year (not just gold ones) so Apple would have to expand the premium gold watch market enormously to sell in the numbers suggested. No, Apple Watch won't move the gold price.
The enthusiasm of gold bugs probably says more about gold that it does about Apple. With US interest rates likely to rise and the USD already rising, it's hard to be bullish on gold. That wont stop people from trying.
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