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Apple To Consume 1/3 Of World’s Annual Gold Supply?
Apple To Consume 1/3 Of World’s Annual Gold Supply?
- 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 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.
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.
Knowledge is Power
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Essential Guide To Storing Gold In Singapore
Essential Guide To Storing Gold In Switzerland
Protecting Your Savings In The Coming Bail-In Era
From Bail-Outs To Bail-Ins: Risks and Ramifications
Currency Wars: Bye, Bye Petrodollar - Buy, Buy Gold
10 Important Points To Consider Before You Buy Gold
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Until they get married...You don't get the hotter wife by going cheap.
Whether it will be a fad that becomes a trend or a trend that becomes a fashion is yet to be seen. If you build it, someone will buy it.
If gold falls in short supply, they may introduce the platinum edition. If platinum becomes too expensive, how about the diamond edition.
If Apple decides to do this, I think they will be successful. Nay sayers move aside. They did not become this successfulk by being dumb.
I seriously doubt this is accurate.
Apple plans on selling 1 million gold watches at $5000 or more a pop?!!!???
I want some of what they're smokin.
They might sell 1 million iwatches but I would bet that less than 1% will be the $5000 gold ones.
The article prjected 1/6th of their their total production of 6 mill would be gold ones. That's a million last I checked
Not much evidence to support this, one article in NZ based on another article in the NY Post. Spin
Bullshit, if you believe this alternative opinion:
http://incakolanews.blogspot.de/2015/03/in-which-wall-street-journal-ask...
The low end model will be made out of pubes.
No one needs watches anymore.
Apple pickers must know that. It is a great cover story.
If I was Mr. Apple, I would do what everybody else should do: start stacking.
I would instruct my bullshit-public-relations-bubble-blowing department to spread a new narrative that Apple will buy shit-loads of gold for the purposes of selling stupid watches but in reality, I would be stacking it all.
I would try to cover all the possible bases for when the shit hits the fan and nobody can afford to pretend they give a shit about iShit anymore. I will plan to open up my own private Apple bank and get ready for the future: listing prices in terms of bullion.
A 1/3 probably not, but there may be a major impact:
http://winteractionables.com/?p=18829
Good luck with that Apple! ;-) Russia, China and India, plus all the others are getting their hands on as much physical as they can, and you were hoping your high-end customers would also look on this product as an investment, I guess.
Nice plan, but I think you will see major shortages, as the others' buying power will be much greater than yours, not to mention some also dig the stuff up.
This is just so dumb.
I love Mac products, but as stuck said this is a very dumb story!
I'm in the printing business, have been for over 30 years. I purchased my first mac in 1988, a mac classic with a 10" B&W screen, Two years latter a Mac SE30 and a couple years latter a power Mac. And so it's gone for nearly 30 years.
I purchased my first Iphone recently for the same reasons - FUNCTION!
A tracking device desguised as a computer with a 1" screen on my wrist is the dumbest idea thinkable, function wise...
I'll never own one for the same reason I haven't had a watch on my wrist since the 80s.
Two onces of gold on your wrist? a Million a month? 1/3 of Gold production? I better run to goldcore and buy buy buy before Apple gobbles it all up!
Hyperbole at best, GoldCore's scrupulous marketing team dreamed this story up.
P.S.
By what criteria do stories make the banner Tyler? On the merits I'm sure, not revenue certainly, lest George is paying handsomely.....
I'm kinda throwing the BS flag on this. Apple is getting attention which is what they want since their products are mostly cool factor ego massagers.
Utter bullshit. Who the hell even wears a watch any more, let alone a million a month. a combination of wishful thinking and unicorn farts.
Imagine stepping out of your new Tesla Model S with that Apple Watch. Wow.
I wear a very nice watch that I bought 30 years but then again, I'm not cool.....
Until now I would never buy something from Apple.
If they could just fit a radiation detecter on that too... I might even fucking consider if we dont need to have a iphone paired, omg...
A bullshit detector would be more useful.