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Apple To Consume 1/3 Of World’s Annual Gold Supply?

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Apple To Consume 1/3 Of World’s Annual Gold Supply?

New Luxury Apple Gold ‘Watch’

- There is a major new buyer in the gold market - Apple

- New Apple watch could use up to one third of total annual gold supply

- Apple expects to sell one million gold watches per month

- Each watch to use up to two ounces of gold

- May have enormous ramifications for gold market and propel prices higher

Apple may consume up to 746 metric tonnes of gold per year in the production of its new luxury Apple watch, due for release in April. This equates to roughly one third of gold’s total annual global mine supply.

The watch will come in three varieties - the entry level "Sports" model, the mid-tier "Apple Watch" and the upper end "Apple Watch Edition" which the company says will be made of 18k (75% pure) gold and is estimated to retail from anywhere between $4,000 and $10,000.

Apple (APPL) have ordered their manufacturing plants in Asia to produce between 5 and 6 million units. Around half of these will be the Sports model which is expected to retail for $349.

Around one third of the order will be made up of the mid-range watch leaving an estimated one sixth of the order to be comprised of the gold edition.

Tidbits, the independent blog discussing all things Apple have estimated that each watch will use 2 ounces of gold.

While this may be an over-estimation - a watch made of 75% gold would be be quite bulky if it used a full two ounces - it is not impossible, especially if buyers were to opt for a gold bracelet with the watch.

Apple's reported expectation to shift one million units of the Edition model will be a tall order. In the end it will probably come down to the price. Even at the lower end estimate of $4,000 it's hard to imagine Apple shifting one million units each month.

However, Apple's ability to generate a buzz or hype, depending on your perspective, cannot be under-estimated.

While details concerning the actual function of the Watch do not suggest a "must-have" motivation for buying it - at least on technological grounds - Apple raving fans may create the massive demand the company expects.

It does not have the element of indispensable usefulness that one could associate with the iPhone or iPad. The major attraction of the ‘Watch’ will be a fashionable one and be about being part of the Apple ‘tribe.’


This is not a terrain in which we would normally expect a technology company to operate in comfortably. However, Apple have recruited the former CEOs of Yves Saint Laurent and Burberry to make up for their lack of expertise. It will be interesting to see how this synergy works out.

We wonder how many people would be willing to shell out for a jewelry and technology hybrid with an expected usefulness of roughly five years when the most expensive element in it is its gold content.

These types of purchases are normally made with a view to it being useful and having sentimental value for a lifetime. Perhaps Apple will offer upgrades where the interior of the watch can be replaced while keeping the same gold exterior.

If the Watch Edition is to be successful it will require quite a leap in the psychology of  jewelry buying. However, we would be hesitant to bet against the capabilities of the Apple marketing machine and the loyalty of Apple buyers in this regard.

Should the Watch Edition retail at $4,000 it should leave Apple reasonable room to manoeuvre in the event of a spike in the price of gold. If Apple were to use a full two ounces of gold it would currently cost them roughly $2,400.

Assuming other costs are not much greater than those involved in producing the Sports model which is expected to retail at $349, we can assume that Apple will have a buffer of around $1,200, to absorb a gold price spike of 50%. These figures don't include marketing costs or expected profits.

The CultofMac blog speculates that Apple would need to wrest 45% of the share of luxury watches from the likes of Rolex and other high-end Swiss watches to meet its target. It is, however, likely that Apple will attract lot of customers who would not normally be in the marketplace for luxury watches.

One million units per month using 2 ounces of gold would amount to the 746 tonnes of the metal mentioned above.

While Apple may not use that amount of gold per unit and may not shift its expected volume of units, what is important is that there is a major new buyer in the gold market. Where Apple goes - others may follow creating additional sources of demand.

The ramifications for the gold market based on these estimates are significant. Currently, China is already buying more than 1,500 metric tonnes annually or more than 50% of global supply.

Creditor nation central banks, particularly the Chinese, are diversifying their gold reserves and accumulating large amounts of bullion on an ongoing basis.

Many central banks, including Germany, Austria, the Netherlands, Belgium, are repatriating their own gold reserves from the Federal Reserve and the Bank of England. Many analysts believe that this is forcing their counter-parties into the market to regain gold that should be in their possession but was dumped onto the market as part of the gold-suppression scheme.

With an enormous buyer like Apple coming into the market, supply is going to have to come from existing stocks of gold. That is to say, supply does not exist to meet this new demand.

Assuming Apple are successful in pitching their new watch to the very rich and trendy, in the real world, where markets are driven by supply and demand fundamentals as opposed to central bank dictats and manipulation, this can only translate into higher gold prices.

We expect to see demand and supply fundamentals to reassert themselves in 2015 and we believe that the demand provided by Apple may push prices higher this year and more importantly in the coming years.

Our long held, long term price target of the real record high, inflation adjusted, $2,400 per ounce remains in place. Gold at $1,196/oz is currently just half the price it was in real terms in 1980. There are few if any other assets in the world that represent such good value.

Having said that, crystal ball gazing and price predictions are a mug's game. What is important is that savers do not have all their eggs in one basket -- bank deposits and investors are properly diversified globally with a range of assets and have an allocation to physical gold as a hedging instrument and safe haven asset.

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MARKET UPDATE

Today’s AM fix was USD 1,196.50, EUR 1,090.60 and GBP 787.85 per ounce.
Yesterday’s AM fix was USD 1,199.75, EUR 1,082.67  and GBP 786.46 per ounce.

Gold fell 0.12% percent or $1.40 and closed at $1,198.00 an ounce yesterday, while silver climbed 0.19% or $0.03 to $16.21 an ounce.

Gold in US Dollars - 5 Years
Gold in US Dollars - 5 Years

Gold dipped under $1,200 an ounce this morning and looks likely to rack up its fifth weekly drop in six weeks, while the U.S. dollar climbed near eleven year highs before the U.S. nonfarm payrolls report at 1330 GMT.

Silver looks set for a second weekly drop in three weeks, while platinum is on track for a sixth weekly drop in seven weeks.

A Reuters poll of analysts expect U.S. payrolls to have increased 240,000 last month and the jobless rate to have fallen from 5.6 percent from 5.7 percent.

Spot gold in late morning trading in London was off 0.3 percent at $1,194.70 an ounce. Comex U.S. gold for April delivery was down $1.30 an ounce to $1,194.90.

Chinese gold prices were about $4-$5 an ounce higher than the global benchmark at the Shanghai Gold Exchange (SGE) showing demand remains robust in China.

Chinese gold withdrawals on the SGE were robust at 37.917 tonnes for the week and are continuing at a run rate which suggests another 2,000 tonnes of demand in 2015.

Draghi said yesterday that the ECB’s monetary experiment of  EUR 1.1 trillion of bond buying in the euro zone will begin next Monday, March 9, and will continue until Sept 2016. This has led to the euro falling further against the dollar and sterling.

The pound hit a more than seven-year high against the struggling euro today, as interest rate differentials moved in favour of the British pound and the ECB confirmed it is set to launch its ‘bazooka’ euro debt monetisation programme.

Gold in Euros - 5 Days
Gold in Euro - 5 Days

The pound, though, fell against the dollar, easing to near four-week lows ahead of a U.S. jobs report, with concerns about a potentially unsettling British election in May also weighing.

Thus, the euro has fallen against gold and euro gold eked out small gains this week (see chart).

Significant risks in the Euro zone are being ignored for now. Greece cannot rely on the European Central Bank to raise the limit on Athens' issuance of short-term debt, Draghi warned yesterday.

He also said the rules meant the ECB could not buy Greek bonds under its new asset-buying programme. Asked about the short-term debt limitations at a news conference following the ECB's meeting in Cyprus, Draghi said that the bank was prohibited by European rules from direct or indirect financing of governments.  "The ECB is a rule-based institution. It is not a political institution," Draghi said.

All eyes are on the jobs number today for signs of how the U.S. economy is doing. A positive or better than expected number should lead to gold falling in price and conversely a worse than expected number could see safe haven bids come into the market.

From a technical perspective, gold looks very vulnerable as it it appears set for a second lower weekly close after a lower monthly close in February. With gold heading for a lower weekly close and a close below the psychological $1,200/oz, further liquidation is likely to be seen in the market as traders get nervous regarding the deteriorating technicals.

Support below $1,170 per ounce is at $1,140 per ounce.

Geopolitical risk remains high. Russia has called the arrival of U.S. military trainers in western Ukraine a “provocation” and warned the Ukraine government that they should rethink the consequences of hosting American forces.

Silver slid to its lowest price in two months at $15.89 an ounce, while palladium dipped 0.2 percent to $821.75 an ounce and platinum was down 0.1 percent at $1,175 an ounce.


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Fri, 03/06/2015 - 15:18 | 5862288 Bastiat
Fri, 03/06/2015 - 15:05 | 5862245 Bastiat
Bastiat's picture

I believe they will sell 1 million a month.  Why?  Because now that Apple's in the DOW and it's a matter of national security, the Fed will buy any that don't sell to keep the rally going.   At least with the gold case it will be worth more than much of crap on their balance sheet.  If they Fed doesn't buy them directly they'll give free money to a bank to lend to some fund to buy them. 

Fri, 03/06/2015 - 14:57 | 5862214 semperfi
semperfi's picture

I'm NEVER going to own a fucking GOVT/CIA/NSA/FBI TRACKING DEVICE - APPLE can take all their iPhones and shove them far up their ASS !!

Fri, 03/06/2015 - 14:56 | 5862205 semperfi
semperfi's picture

1/3 ?   hahahaha!!!!    I'm calling MAJOR BULLSHIT on this one.  C'mon really?  hahahahahaha!! 

Fri, 03/06/2015 - 14:50 | 5862176 Winston of Oceania
Winston of Oceania's picture

You mean the NSA "we can't hear shit from your pocket or purse" i-pendage watchy thing is made of real gold? Or is it just a gold mine for the i-spy algos?

Fri, 03/06/2015 - 14:48 | 5862165 Bastiat
Bastiat's picture

At that pricepoint there will be chinese knockoffs.

Fri, 03/06/2015 - 14:26 | 5862066 studfinder
studfinder's picture

Wow...what an easy way to make money...  there is going to be a run on machetes.

Fri, 03/06/2015 - 13:51 | 5861917 quasimodo
quasimodo's picture

I think you may see some wrists/hands laying around after these come out

 

Fri, 03/06/2015 - 13:49 | 5861909 Greenspazm
Greenspazm's picture

A red-hot poker about to be thrust up the anus of the LBMA:
http://kingworldnews.com/andrew-maguire-smashed-gold-today-hsbc-shocks-c...

Fri, 03/06/2015 - 13:55 | 5861929 FieldingMellish
FieldingMellish's picture

KingWorldNews and Andrew Maquire... really? That is soo 2014... and 2013.. and 2012...

Fri, 03/06/2015 - 14:08 | 5861957 Greenspazm
Greenspazm's picture

I absolutely share your skepticism.....but Maguire is going out on a long limb in that piece.
I couldn't find the HSBC vault closure "news" anywhere else, either.

Fri, 03/06/2015 - 13:38 | 5861870 Spungo
Spungo's picture

This article sounds fake. Apple is not really known for gold or silver type of style. They focus more on the shape, the feel, and the user interface. 

Fri, 03/06/2015 - 14:46 | 5862156 Bastiat
Bastiat's picture

Go to Apple's website and see for yourself what they will be announcing soon.  There is a gold one but I don't know if it's solid.  If it is solid gold it might explain the price because at least the gold would be worth something after 3 years.   https://www.apple.com/watch/apple-watch-edition/

It does indeed look like solid 18K from the description. But two oz?  I don't think so.  In any case, the gold is likely already bought.

Fri, 03/06/2015 - 13:23 | 5861795 GIABO
GIABO's picture

Those APPLE fanboys are to stupid to buy gold.

Fri, 03/06/2015 - 13:11 | 5861754 shovelhead
shovelhead's picture

I dunno...

Apple didn't get where they are by underestimating the stupidity of Apple fanbois/girlz.

They still haven't fixed my sons computer. Why buy Apple for twice the price for the same thing you can get a PC for I asked?

They look cool.

Looks great in the repair center.

He's gotten a lot smarter since he got out of the university. The infection has cleared up.

 

Fri, 03/06/2015 - 13:05 | 5861724 Oswald did it
Oswald did it's picture

I'm not getting an Apple watch.  I'm holding out for the Apple gold plated digital fanny pack.  That would be more useful to me

Fri, 03/06/2015 - 13:01 | 5861704 Conax
Conax's picture

"In Philadelphia it's worth 50 bucks."

"Gimme the money.  How much for the gun?"

Fri, 03/06/2015 - 12:47 | 5861649 silverer
silverer's picture

I mean, maybe for some it's cool to have, but not a whole lot of utility for that amount of money.  I could see maybe a gold bezel, adding $800.00 or so for the uppity crowd.  But I could think of a better place for gold.  I wouldn't feel too comfortable walking around with a short sleeve shirt wearing this in a big city, or a lot of other places, either.  Maybe put it in a polycarbonate case in your alarmed and insured home next to your autographed baseballs?

Fri, 03/06/2015 - 12:46 | 5861642 agstacks
agstacks's picture

What horsehit this article is. Anyone who thinks each watch will conatin 2 ounces of AG needs to have their head examined.  1 million sales at $4000 each? lol. Goldcore has zeor credibility. 

Fri, 03/06/2015 - 12:45 | 5861634 czarangelus
czarangelus's picture

All I have to say is, if you buy this, you have a money:sense ratio of at least 4000:1

Fri, 03/06/2015 - 12:41 | 5861620 sapioplex
sapioplex's picture

This article is bullshit.

Fri, 03/06/2015 - 12:41 | 5861619 bluskyes
bluskyes's picture

This has to be the most over-hyped story so far this year.

And who the hell would want a 3k chunk of gold with a wireless signature?

Fri, 03/06/2015 - 14:25 | 5862038 conspicio
conspicio's picture

Mah nigga Shayquan say he gonna get one from Dinky, who gots a Chinese hookup at the massage place, and he melt it down fo the gold and make it into a new grille cause his teef all bad from sumpin, and then be robbin they po white folk who be dumb enough to wear this to get mo gold afta that. He ain't dumb. Shayquan a successful hoodtrepreneur.

Fri, 03/06/2015 - 12:52 | 5861675 GeezerGeek
GeezerGeek's picture

The Feds will know where you are when they come to confiscate your gold. It's all an NSA plot.

Fri, 03/06/2015 - 12:57 | 5861689 Creepy A. Cracker
Creepy A. Cracker's picture

No doubt thief tools (WiFi watch locators/trackers) will be released as the gold watches are rolled out.  Of course you already stated that - just with a different thief.

Fri, 03/06/2015 - 12:08 | 5861473 FieldingMellish
FieldingMellish's picture

I have problems with both the projected 1m/month sales figure and the 2 oz per unit gold content. Drop $4-5K on a piece of tech that will be outdated in 1 year? Not at a million a month you're not. I suspect a large portion will also come from cannibalized sales of other luxury watches. Watch (haha) the sales plunge as arms start getting hacked off in thefts.

Fri, 03/06/2015 - 13:57 | 5861934 bluskyes
bluskyes's picture

It's the 1% market they are targeting. How many 1%'s are going to buy a gold watch that needs a daily recharge? I have a 15 year old digital timex, that is still working on the original battery.

Fri, 03/06/2015 - 12:07 | 5861467 Conax
Conax's picture

A geek and his bling are easily parted.  This is great news for strong arm robbers everywhere.

Fri, 03/06/2015 - 12:53 | 5861678 Creepy A. Cracker
Creepy A. Cracker's picture

LOL!  An inner city Obama voter jobs program in disguise.

Fri, 03/06/2015 - 13:07 | 5861730 dexter_morgan
dexter_morgan's picture

hidden wealth redistribution program

Fri, 03/06/2015 - 12:02 | 5861443 Jack Daniels Esq
Jack Daniels Esq's picture

Apple watch, gay Tesla - Ill keep my Daytona

Fri, 03/06/2015 - 11:57 | 5861427 Fix It Again Timmy
Fix It Again Timmy's picture

Somebody, PLEASE tell me that this is an Onion article!....

Fri, 03/06/2015 - 12:19 | 5861516 gafgroocK
gafgroocK's picture

 

 

 

Apple bought The Onion.........

Fri, 03/06/2015 - 11:53 | 5861411 Bobby Lee
Bobby Lee's picture

Post ape-pocca-lipps and no amount of trade goods will find you a charged button battery, these will be melted down. For utility, better to buy a fine working antique gold mechanical pocket watch.

Fri, 03/06/2015 - 11:49 | 5861394 RealityCheque
RealityCheque's picture

Apple Watch: exclusively for cunts.

Fri, 03/06/2015 - 13:08 | 5861738 Oswald did it
Oswald did it's picture

Seriously.  Anyone purchasing one of these should be forced to have the word "CUNT" tattooed on their forehead so they can be easily identified and avoided

Fri, 03/06/2015 - 13:33 | 5861843 RealityCheque
RealityCheque's picture

My downvotes suggest some touchy apple fans are nearby. Cunts.

Fri, 03/06/2015 - 13:23 | 5861794 cheech_wizard
cheech_wizard's picture

If I combine that with a Google Glass wearer, do I get "GLASSHOLE-CUNT" ?

Obviously we need to start breeding people with bigger foreheads. 

Fri, 03/06/2015 - 15:07 | 5861669 Creepy A. Cracker
Creepy A. Cracker's picture

So... for women only?

Fri, 03/06/2015 - 11:41 | 5861365 dexter_morgan
dexter_morgan's picture

How do you sell a watch with 2 ounces of gold in it for $349? was that grams?

Fri, 03/06/2015 - 11:52 | 5861409 xavi1951
xavi1951's picture

Read it again.

Fri, 03/06/2015 - 11:51 | 5861404 e_goldstein
e_goldstein's picture

Tungsten, my good man, tungsten.

Fri, 03/06/2015 - 13:03 | 5861712 silverer
silverer's picture

Buy a tungsten watch.  It will survive after you burn to ashes in a major fire.  They can bury the watch with your ashes.  Gold melt point: 1,947 degrees F.  Tungsten (Wolfram) melt point: 6,192 degrees F.

 

 

Fri, 03/06/2015 - 13:02 | 5861708 dexter_morgan
dexter_morgan's picture

Well, that makes sense, but where does it say tungsten anywhere in the article above?

Fri, 03/06/2015 - 11:48 | 5861393 Toolshed
Toolshed's picture

Read it again, or maybe for the first time.

Fri, 03/06/2015 - 13:26 | 5861809 dexter_morgan
dexter_morgan's picture

LOL - you got me there. When I see APPLE and Goldcore I have to admit I don't read it all that carefully.

Fri, 03/06/2015 - 11:40 | 5861362 silentboom
silentboom's picture

Well if liberal Apple buyers bought this watch it might be the only real savings they had and they wouldn't even realize it.

Fri, 03/06/2015 - 11:40 | 5861358 pragmatic hobo
pragmatic hobo's picture

... my calendar must be broken ... i had no idea it was apr 1st already.

Fri, 03/06/2015 - 11:28 | 5861311 lordbyroniv
lordbyroniv's picture

sorry,...but if this is supposed to make gold rally...gold is in serious trouble.

Fri, 03/06/2015 - 11:28 | 5861299 kaiserhoff
kaiserhoff's picture

Nutz.

Geeks and bling are different animals.

Reggie might buy one, but that's just one;)

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