Apple gold watch to take up 30% of world gold production

[Renegade]

This is just hilarious:

http://www.cultofmac.com/313458/demand-apple-watch-use-third-worlds-gold/

Demand for Apple Watch could use up third of world’s gold


We’re still waiting for the final pricing details on the Apple Watch, but if recent reports that Apple plans to sell one million gold Edition units a month are true, Apple Watch could wreak havoc on gold prices and do who knows what to the global economy.
Josh Center at TidBits has done some math on Apple Watch and estimates that if production rumors are correct, Apple will be bidding for a third of the world’s annual gold supply to make enough gold watches to meet demand.

To put those numbers in perspective, Apple needs so much gold it could turn the all 7,000 metric tons of gold stored at the Federal Reserve Bank of New York — you know, the one from the plot of Die Hard 3 — into gold watches in less than a decade.

Assuming the Apple Watch Edition contains 2 troy ounces of gold (2 troy ounces equals 62.2 grams), Centers estimates Apple would need 24 million troy ounces of gold per year for its watches. Or roughly 746 metric tons. About 2,500 metric tons of gold are mined per year, so if Apple uses 746 metric tons they’ll need about 30% of the world’s annual gold production.

Of course there’s a big ‘if’ here, and that’s whether the WSJ got production numbers right in its report claiming Apple aims to sell nearly one million Apple Watch Edition models per month. Those numbers sound suspect considering Rolex only sells 600,000 watches a year for an estimated $4.7 billion in revenue.

The price of gold is currently $1,200 per ounce, which would make Apple’s annual gold needs somewhere around $28.8 billion. Apple would need to store more gold per year than Rolex makes in sales. The annual sales of high-end Swiss watches was about 27 million in 2013. Apple would have to takeover 45% of the entire luxury watch industry to hit its mark. If history is any indication though, there’s one company that can completely dominate an old tired market despite pricing, and it’s Apple.

Even if you cut the projections in half the numbers are still mind-boggling. Hopefully Apple’s already working on a Scrooge McDuck sized vault to store all its gold.

http://www.news.com.au/technology/apple-set-to-buy-a-third-of-worlds-gold-for-luxury-apple-watch/story-e6frfrnr-1227239444734

APPLE is set to buy up one third of the world’s gold in order to meet the demands of the new up-market Apple Watch, according to reports.

Following the prediction in The Wall Street Journal that Apple plans to sell one million top-of-the-range 18-karat gold Apple Watch Edition units a month, a new report reveals the massive impact that would have on the gold market and world economy.

The report in TidBits crunches the numbers working on the reasonable figure that each gold watch will contain 2 troy ounces (62.2 grams) of gold.

Uh, no. Not gonna happen. Apple will not use 2 ozt of gold for 1 million watches a month.

My bet is that we'll see some article in the near future retracting these ones as some kind of gross misunderstanding.

The WSJ article:

http://blogs.wsj.com/digits/2015/02/17/apple-orders-more-than-5-million-watches-for-initial-run/

Apple has asked its suppliers in Asia to make a combined five to six million units of its three Apple Watch models during the first quarter ahead of the product’s release in April, according to people familiar with the matter.

Half of the first-quarter production order is earmarked for the entry-level Apple Watch Sport model, while the mid-tier Apple Watch is expected to account for one-third of output, one of these people said.

Orders for Apple Watch Edition – the high-end model featuring 18-karat gold casing – are relatively small in the first quarter but Apple plans to start producing more than one million units per month in the second quarter, the person said. Analysts expect demand for the high-end watches to be strong in China where Apple’s sales are booming.

Apple Watch Sport will start at $349. Apple hasn’t announced pricing for the other models, but Apple Watch Edition is expected to be among the most expensive products the company has ever sold, likely surpassing the $4,000 Mac Pro computer.

Apple sets production plans based on its forecast of demand for the new product. But Apple quickly adjusts these plans if sales are different than what it estimated. Suppliers say that Apple adjusts its so-called “plan of record” more often and more quickly than any other consumer-electronics company.

Nope. Not gonna happen. Somebody got their signals crossed. 30% of world gold production ain't going into Apple watches.

Gold is trading at about USD $1,210/ozt right now, and if there were any truth to these articles the price would have spiked massively despite the paper shorts (unless Apple is already manipulating the gold market along with GS & co.)

http://charts.kitco.com/KitcoCharts/?utm_source=kitco&utm_medium=banner&utm_content=20110407_iCharts_chdata&utm_campaign=iCharts

[Renegade]

It's still in the news.

http://www.ft.com/intl/cms/s/0/fc1b9aaa-c31c-11e4-ac3d-00144feab7de.html#slide0

$10,000 watch tests Apple’s luxury appeal

When Tim Cook unveiled the Apple Watch in September, the iPhone maker’s chief said it was the “most personal device we’ve ever created”.

Some models will also be Apple’s most expensive products in more than 30 years. The company is widely expected to put a price tag of at least $10,000 for the gold Apple Watch Edition when it shows off the devices at a press event in San Francisco on Monday.

According to the details released so far, the premium device will offer no additional features or functions above those in the aluminium Apple Watch Sport, which starts at just $350.

Yet the volume of gold alone in the new device’s 18-carat casing and buckle will make it Apple’s priciest gadget since the Lisa, a $10,000 computer released in 1983. The high-spec Lisa, which took five years to develop and was overseen by Apple co-founder Steve Jobs, sold just 100,000 units and is seen as one of the company’s rare flops.

Apple Watch is the first new product category to emerge from the company since Jobs’ death in 2011. Its ambitious pricing and luxury styling shows how Mr Cook and his design chief, Sir Jonathan Ive, hope Apple can transcend Silicon Valley to enter the more prestigious and lucrative worlds of fashion and jewellery.

“I do see that the Watch is a move away from what is traditionally understood as consumer electronics,” Sir Jonathan said at a conference last year.

“Apple has always been about ‘affordable luxury’: at the higher end of the price range and with a premium feel, but it’s always been within reach of the ordinary consumer,” says Jan Dawson, technology analyst at Jackdaw Research. “This is the first time that Apple has moved into straightforward luxury.”

The rest in case you hit a paywall

Previous attempts by tech companies to sell mobile devices for thousands rather than hundreds of dollars include BlackBerry’s Porsche Design range and Vertu, the former Nokia mobile phone division sold to private equity firm EQT in 2012.
$10,000
Expected price tag for Apple’s 18-carat gold Watch
“This idea of trying to crash into the fashion space with technology is one that works for very few,” says Ethan Imboden, who works with tech start-ups at frog, a design company.
Vertu made its name peddling bling to the nouveau riche but its latest models eschew gold and diamonds for a more understated luxury look, using materials such as ostrich leather.
Yet even for many who could afford Vertu’s pricetags, the iPhone’s allure has been stronger — even though the gold colouring Apple introduced to its smartphone in 2013 was merely superficial.
“The Vertu experience teaches us that bling itself is not enough,” says Mr Dawson. “They weren’t fantastic phones in the first place.”
He suggests that Apple is better positioned because its brand is already an aspirational one, despite selling a decidedly mass-market 75m iPhones in its last quarter alone.
However, some see the Apple Watch Edition’s rich pricing as an over-reach that could backfire.
Christian Madsbjerg, co-founder of ReD Associates, a consultancy that counts Samsung and Adidas among its clients, argues that Apple risks making the same mistake Louis Vuitton did when it tried to hike prices of its luxury bags for upmarket customers in China and Russia.
“We call this the ‘rich people are dumb’ strategy,” says Mr Madsbjerg, who predicts it is “not going to be successful” for Apple. “They’ll sell a couple in some places but it’s not a sustainable strategy because rich people are not stupid: they start asking, ‘Why should we pay so much more?’”
One potential obstacle to success is the rapid obsolescence of any technology. While luxury watchmakers pitch their timepieces as future heirlooms, people familiar with Apple’s plans say the next version of its smartwatch is already in development, due for release next year.
A gold watch’s high margins might impress Wall Street, which has driven Apple’s market capitalisation above $750bn since it reported the highest net profit in US corporate history in January, but not other potential Watch buyers, Mr Madsbjerg argues.
“It alienates your core when you become too focused on quick money in Asia,” he says.
They’ll sell a couple in some places but it’s not a sustainable strategy because rich people are not stupid: they start asking, ‘Why should we pay so much more?’
- Christian Madsbjerg, ReD Associates
Others take quite the opposite view: that a luxury gold watch will light a halo around its more affordable siblings. “It changes my perception of the purchase I’m making,” says frog’s Mr Imboden, especially if it makes $1,000 for a steel model seem reasonable.
For some high-end customers, even $10,000 is a small price to pay for a watch; the fact it will be obsolete in two or three years merely adds to the ostentation of its purchase.
“They know if you buy a gold Apple Watch that it’s not going to be a long-term investment,” says Ariel Adams, editor of luxury timepiece site A Blog to Watch. “They just want to show off.”
Having a gold option among Apple Watch’s many interchangeable straps may also appeal to more fashion-conscious customers, says Mr Imboden, allowing them to personalise an intimate device that will probably sell in the many millions.
“Fashion for many is a means of individuality and self expression,” he says. “From a design standpoint it sends what I think is an appropriate message: we use gold for jewellery, there is a tradition in that, so [Apple] aren’t going to give you fake gold.”
In the past two years, the company has assembled a team of luxury industry professionals, including former Burberry chief Angela Ahrendts, Paul Deneve from YSL and designer Marc Newson, to help it understand the dynamics of Vogue and Paris Fashion Week, where the Watch has already made appearances.
“I’m much more concerned about how we can make them as good as possible than how many we’ll sell,” Sir Jonathan, Apple’s top tastemaker, told the Financial Times’ How To Spend It magazine in an interview.
But as Mr Cook looks to the future, the gold Apple Watch Edition may merely be testing the depth of his customers’ wallets as it researches an even higher priced product: a car.
“They’re already considered the luxury brand of consumer electronics,” says Mr Adams. “They feel [a premium-priced watch] is a natural step in the direction that they want to go in. Other brands would do it if they could.”

Maybe they're serious... I'm still skeptical though...

[Innuendo]

The original article fails to take into the laws of supply and demand. If Apple were to impact the world's gold supply so sharply then gold prices would skyrocket, Apple's price for their watch would go through the roof, and demand for this luxury timepiece would quickly turn into a trickle.

There's no way in this reality, or any other, that Apple could consume that much gold...for a decade...and prices would remain stagnant.

Silly web authors must have failed their Econ classes.

[Renegade]

The original article fails to take into the laws of supply and demand. If Apple were to impact the world's gold supply so sharply then gold prices would skyrocket, Apple's price for their watch would go through the roof, and demand for this luxury timepiece would quickly turn into a trickle.

There's no way in this reality, or any other, that Apple could consume that much gold...for a decade...and prices would remain stagnant.

Silly web authors must have failed their Econ classes.

Yup.

Now, they may sell some, but they're not going to sell a million a month.

But you did get me thinking about the price... if they engaged in market manipulation like Goldman Sachs & their buddies, they could short paper gold to suppress the price, but that carries risk as well. I would have expected gold to rise if their million a month sales target had any credibility, unless they were shorting, but I just can't see Apple getting into the paper gold shorting business. That would require getting in bed with GS & JPM, etc., and it isn't remotely a part of their business.

[Innuendo]

But you did get me thinking about the price... if they engaged in market manipulation like Goldman Sachs & their buddies, they could short paper gold to suppress the price, but that carries risk as well.

I suppose they could have had a 5, or 10, year plan...and used all that early iPod money to invest in gold heavily over the years. But...I just don't see them being adept at that kind of visionary thinking.