Precious Metals

The Apple Watch Edition is encased in 18-karat solid gold. Given that Apple reportedly plans to produce more than 1 million units per month in Q2, the gold industry could be in for a big increase in demand.

Image courtesy of Apple.

Any news related to an Apple (NASDAQ:AAPL) product launch gets people excited, but the company’s latest invention will be a lot more than the most sought-after gadget of the year — in fact, it could revolutionize the gold market.

That’s because the Apple Watch Edition, which is set to be released in April of this year, is encased in 18-karat solid gold.

The high-end luxury watch will come in two sizes, 38 millimeter and 42 millimeter, and will be available in either yellow or rose gold; it will be priced between US$10,000 and $17,000. Given that Apple reportedly plans to produce more than 1 million units per month in Q2, it’s going to need a lot of gold — that could mean big things for gold investors.

How much gold will Apple need?

While it’s uncertain how much gold will used for each watch, speculation has been rife that if each unit contains 2 troy ounces of gold, Apple will have to purchase roughly 750 tons of gold per year to produce 1 million watches monthly. The amount of gold mined annually is somewhere around 3,000 tons, with the last recorded number being 2,770 tons in 2013.

Conversely, the watches could only contain half a troy ounce of gold — that would reduce those numbers pretty significantly, but could still mean big things for the slumping gold price.

$10,000 price tag

There has been much guessing about how many people will be willing to fork over $10,000 for Apple’s fancy new timepiece, but a look at the company’s rising sales over the years speaks to its popularity. Case in point: Apple sold nearly 170 million iPhones in 2014 and has already sold 74.47 million in the first quarter of 2015.

That said, the price tag for the Apple Watch Edition could definitely be a hindrance, especially considering the fact that the next-highest-priced Apple product is the MacBook Pro, which actually went through a price adjustment when sales weren’t up to par.

However, it’s likely that the luxury accessory will be marketed to those that are used to paying the big bucks, and it’s priced tamely compared to other high-end watches. For instance, the the Rolex Sky-Dweller Oyster model, which is also 18-karat yellow gold and 42 millimeters in size, costs a whopping $46,000. And while Swiss watches are typically sought because of their rarity and hand-crafted details, the Apple Watch Edition has enviable features of its own — it’s essentially a mini computer with endless capabilities.

Third-largest gold consumer?

If the Apple Watch Edition proves to be as popular as all Apple’s other creations, and if even the more modest estimated raw material requirements ring true, the device could require nearly a third of the world’s gold, and would therefore make Apple the third-largest gold consumer in the world, behind China and India.

That’s a pretty impressive statistic, but investors would of course do well to restrain their excitement until Apple releases further details about the watch — and until sales figures start coming in. That said, some industry players are already fairly keyed up — as Rob McEwen, chief owner at McEwen Mining (TSX:MUX,NYSE:MUX), said at PDAC, “that watch might become a currency.”

At close of day Wednesday, Apple’s share price was sitting at $122.24, down 1.82 percent. As of 4:45 p.m. EST, the gold price was at $1,154.40 per ounce, down 6 percent.

 

Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Rob McEwen: $5,000 Gold a Possibility?

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