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How Much Gold Will the Apple Watch Edition Consume?

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The Apple Watch Edition might be Apple’s most unusual product in years. Questions abound about the 18-karat gold smartwatch. How much will it cost? Will Apple offer an upgrade path for it?


But I have a broader question: how will it affect the world’s gold supply?

The Wall Street Journal has reported that Apple plans to ramp up production of the Apple Watch Edition to over 1 million units per month in its second quarter of production. That’s an unbelievable number of gold watches, especially considering that they could cost as much as $10,000 each. Could this number be realistic?

For the sake of argument, let’s assume that each Apple Watch Edition contains 2 troy ounces of gold (Apple Spotlight estimates 50–75 grams in the Apple Watch Edition; 2 troy ounces equals 62.2 grams). Now, 18-karat gold is only 75 percent pure, because pure gold is too soft for everyday use, but for easier math, let’s also assume that 75 percent still uses 2 troy ounces of gold. (Even if Apple uses only 1 troy ounce, halving all the numbers below, they’re still huge.)

If Apple makes 1 million Apple Watch Edition units every month, that equals 24 million troy ounces of gold used per year, or roughly 746 metric tons.

That’s enough gold to make even a Bond villain blush, but just how much is it? About 2,500 metric tons of gold are mined per year. If Apple uses 746 metric tons every year, we’re talking about 30 percent of the world’s annual gold production.

That’s a sobering thought, but it’s not entirely unbelievable: Apple has a tendency to buy up so many resources that competitors can’t keep up, and it certainly has the cash to do so. But gold is different from aluminum, say, in that it’s a precious metal. Although currencies are no longer backed by gold, governments still hoard it as a “store of value” and as part of the guarantee of a financial system. The Federal Reserve Bank of New York stores about 7,000 metric tons of gold in its Manhattan vault, all owned by governments, banks, and international organizations. It would take Apple less than a decade to turn all of that gold into watches.

Speaking of vaults, where exactly would Apple store all of this gold? (Besides in a Scrooge McDuck-esque money pit at the very center of the new circular Apple campus.) At today’s price of $1,200 per ounce, Apple’s annual gold needs would be worth $28.8 billion dollars. Granted, it may not hold all of that on hand at any one time, but talk about a supply chain nightmare. Moving that much gold means a high risk of shrink, an industry term for vanishing product. Not to mention the risk of attacks by dragons and SPECTRE.

Meanwhile, while Apple’s annual gold supply alone would be worth $28.8 billion, luxury watchmaker Rolex sells “only” $4.7 billion of product every year, from an estimated 600,000 watches.

There are two conclusions we can draw from this smattering of data. The first is that Apple is about to take over the world. Not only will it be the most valuable company on the planet, but it will also be bidding for a third of the world’s annual gold supply, wreaking havoc on gold prices and doing who knows what to the global economy.

The alternative is that the esteemed Wall Street Journal is off on its Apple Watch Edition sales by an order of magnitude (or more). That would put the number at 100,000 per month, which seems more plausible.

Don’t get me wrong, it’s never safe to underestimate Apple. If anyone can sell 12 million $10,000 quasi-disposable smartwatches a year, it’s Apple. But once you run the numbers, it sounds nuts. Estimates from Watch-Insider.com put the annual unit sales of high-end watches made in Switzerland and Germany at about 27 million in 2013, and another industry site, W The Journal, reported that all of Switzerland exported about 29 million watches in 2012. Could Apple push up against 45 percent of the entire current luxury watch industry?

Even at 100,000 per month, or 1.2 million units of the Apple Watch Edition sold annually, that’s still a lot of gold — 2.4 million troy ounces or about 75 metric tons. That won’t throw such a big wrench in the global gold market, but it will still have an impact.

I may buy a gold coin or two, just in case.

 

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Comments about How Much Gold Will the Apple Watch Edition Consume?
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So if the watch contains an estimated $1800USD worth of gold and the price of the base model is $349. Then the gold watch should be priced at $2499 or $2999.

I don’t see how people seem to be guessing the price at $10K. Everyone seems to be reasoning that "if Rolex can sell a $10k watch then so can Apple”.

I can’t find another watch maker that sales their base model for $X and then sells a similar model for $28X.

Not long to wait now.
Adam Engst  An apple icon for a TidBITS Staffer 2015-02-25 09:11
In the research we did for this piece, we saw quite a few estimates of how the price of a watch breaks down, and there's always an intangible amount for "form" that goes beyond the basics of the object (the $349 in this case) and the cost of the gold. That's the value of owning a Rolex over some other brand, for instance, or having a watch that has some other special characteristic that sets it apart from other high end watches.

That's the big unknown... And the band. A lot of the gold in a Rolex is in the band, but Apple hasn't said anything about a gold band yet for the Apple Watch Edition.
melgross  2015-02-25 09:49
No. Watch manufacturers and jewelry manufacturers price their products well above the price of the precious metal involved.

For example, Rolex prices a particular model in stainless steel with a stainless steel bracket at $6,000. But they price the gold version upwards of $25,000, even though the amount of gold in the case and braclet is about 5 ounces, worth about $6,000 itself. Therefor, they're charging triple for the gold.

This is normal. So if Apple uses two actual ounces of gold, with a value of $2,500, they could bump that to $7,500 in addition to the price of the watch itself, and not be overpriced as compared to the competition.
Jeff B  2015-02-25 09:34
Apple claims that it's metallurgists have fabricated a gold that's twice as hard as regular gold, and it's MADE FROM 18k gold. The exact quote:

"Each has a watch case crafted from 18-karat gold that our metallurgists have developed to be up to twice as hard as standard gold."

That certainly gives them enough wiggle room to dilute the actual amount of gold required by a significant amount.

And where the hell are you getting your numbers that Apple expects to sell 1M Editions a month?
MrMayor  2015-02-25 09:49
'And where the hell are you getting your numbers…'

From the WSJ, a fact this piece clearly and unequivocally states in its third paragraph. #TheMoreYouKnow
Adam Engst  An apple icon for a TidBITS Staffer 2015-02-25 09:50
Third paragraph, first sentence. :-) The Wall Street Journal published those numbers, and the entire point of the article is show why they don't really make much sense.

As far as the 18-karat gold goes (fourth paragraph), unless Apple is changing the definition of the karat, that means that it's 75% pure gold.

https://en.wikipedia.org/wiki/Fineness
JohnB (SciFiOne)   2015-02-25 12:30
You forgot KAOS, Agent Smart's nemesis. (Fun article - Thanks)
Christian Haelg  2015-02-26 23:24
This article uses completely unrealistic premises. First of all, no one would want to have two troy ounces of gold (plus the additional weight of the non-gold guts) on their wrist. The weight would make wearing such a watch uncomfortable. More likely: the Apple gold watch will have an 'outer' housing, which will consist of 750/1000 gold, reducing gold demand per watch to perhaps 1/4 troy ounce of gold.
Adam Engst  An apple icon for a TidBITS Staffer 2015-02-27 09:46
Looks like some Rolex watches weigh in at as much as 231 grams, with others at 99, 105, 130, 135, 137, 148, 168, and 221 grams. So if two troy ounces weighs 62 grams, it doesn't seem unrealistic that the rest of the watch would fit with the Rolex's range. The Pebble is 38 grams, for instance, and the Pebble Steel is 56 grams.
drdamour  2015-02-28 21:47
learn to read your sources...the wall street journal says 1M apple watches across all models, not 1M of the gold model. The source is a bit confusing...but wow this tidbit author should read the source twice. I want 500 M&Ms - the tastiest of which is red - in my hand. does not mean i want 500 red M&Ms..it just means red is available.
Josh Centers  An apple icon for a TidBITS Staffer 2015-02-28 22:11
"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."

What exactly did I misread?
Matthias  2015-03-01 05:34
Well, this is according to "people familiar with the matter", who even state that order numbers are low -- so it's probably not more than the wet dream of some "analyst". (It does not take much to make it to media like the WSJ if you are an "analyst".)
It does absolutely not make any sense that apple would ship this number of a product at this price point, not in comparison to the high end watch market (which at least sells products which will probably last a century at this price) and also not compared to what Apple has been doing in the past.
drdamour  2015-03-10 11:43
you misread the intent. the high end model is a side note irrelevant to the number of orders. I'd expect at some point you learned that anything in a - is supposed to be supliforous. the sentence reads factually as:Orders for Apple Watch Edition are relatively small in the first quarter but Apple plans to start producing more than one million units per month in the second quarter

see...the number has nothing to do with the gold edition specifically. market watch picked up your mistake too. what a joke online journalism has become..don't you have editors?
Adam Engst  An apple icon for a TidBITS Staffer 2015-03-10 16:58
Please desist with the personal attacks or your comments will be removed.

Our goal with the article was to point out the ridiculousness of the WSJ estimate by calculating out what those numbers might mean. The article was edited by two people, myself included, and I'm comfortable with what it says.

Interpreting the WSJ quote as you do is possible only if you're assuming that the WSJ writer and editors intended a change of subject from the beginning of the sentence (which talks about the Apple Watch Edition) to a clause that isn't even set off with a comma.
drdamour  2015-03-14 03:12
because it's offset with dashes...the structure is called an appositive. When an appositive contains commas dashes are used instead of commas. refer: http://www.grammarly.com/handbook/punctuation/dash/3/dash-setting-off-appositives-that-contain-commas/why WSJ chose to use dashes when their appositive has no commas, i am unsure, but it's still a rather simple grammar rule. Some simple google shows that using - to offset an appositive is allowed: http://www.dailywritingtips.com/4-punctuation-marks-for-forming-appositive-phrases/

so I think it's pretty clear the article source was misrepresented, the WSJ never claimed 1M gold watches. just 1M watches.

I agree the WSJ wording could be considered confusing, but it's pretty clear that the misinterpretation is on the behalf of this tidbit author.

I think the responsible thing to do would be to own up to it and add an update to the article. Or at least verify the intent with the WSJ.
Adam Engst  An apple icon for a TidBITS Staffer 2015-03-14 14:48
The appositive merely describes the Apple Watch Edition and doesn't signal a subject change. Take it out and you get:

"Orders for Apple Watch Edition are relatively small in the first quarter but Apple plans to start producing more than one million units per month in the second quarter."

If the intent is change the subject, it's badly written. If not, it's badly reported.

Regardless, this deceased equine has suffered enough.
Jean-Michel Paris  2015-03-03 00:08
I can't grasp the meaning of "If anything, too much popularity may limit sales."
Adam Engst  An apple icon for a TidBITS Staffer 2015-03-03 09:12
Yeah, now that I look at that closely, it's worded badly. The point is merely that exclusivity matters, and if the Apple Watch Edition becomes too popular, it won't be sufficiently exclusive any more. Having a Toyota (however well made) isn't exclusive; having a Ferrari is.

But obviously, if it's popular, sales won't be limited, even if it's not longer desirable to the high-falutin set.

I'll tweak it to reduce the confusion.
tom powers  2015-03-04 12:10
As Yogi Berra (probably never) said: "Nobody goes there anymore, it's too crowded."
I'm sorry but this is complete nonsense - Apple might sell one million watches / month at some point (although I really doubt it but well what do I know ?) but never, ever, that many high end gold models. There is no if here, I'm 100% convinced that the product mix will always at best be a few percent of the gold model, the WSJ can write whatever they dream of. I'm happy to take the bet :=)
asm732  2015-03-03 12:02
I think the WSj is beholden to clicks too, hence clickbait...
Jonathan Dagle  An apple icon for a TidBITS Contributor 2015-03-06 17:29
This story's analysis is hopelessly flawed. If you compare what we can see of the Apple Watch Edition to a gold Rolex, you can't help but notice that there are no gold Apple Watch pictures with gold (or even metal) bands. The weight of the empty watch case is about ½ the weight of the metal bracelet. Now I don't have a gold Rolex to disassemble and weigh, but some nice people over at eBay claim to have done so (http://www.ebay.com/gds/How-Much-Gold-Is-Really-In-A-Rolex-Watch-/10000000001632748/g.html). These numbers *seem* to make sense. Their data shows the weight of a the gold Rolex watch components without the band are about 31g, which means 23g of 24K gold, or 0.81 ounces. So 2 ounces is +146% than you'd see if Apple Watch contained as much gold as a Rolex. Just looking at the Apple Watch it's pretty clear there would be less gold--it has a very large front crystal, and a "crystal" on the back. Considering the Apple Watch will employ the design and assembly technology we've seen in iPhones, then the case is likely to be much thinner, and contain considerably less gold than a Rolex. My guess is that the 18K gold case would weigh no more than 18-20g, and thus about 13-15g of gold. At today's price of $1169 that's worth about $535. "2 oz of gold".... Ridiculous.
Why is there no mention in the article or comments of the extremely harsh environmental impact of mining what's left of the planet's gold? Gold mining is a toxic travesty and purchase of any new gold is the sort of "Gimme, I want" ignorance that is ruining our Earth. If you have no idea what I'm talking about please get educated. A good place to start is http://www.nytimes.com/2005/10/24/international/24GOLD.html
Gonzalo Tudela  2015-03-08 12:15
Estimating 2 Troy ounces of gold is a quite a substantial difference from the strategy they are using.
A fairly recent patent shows that they will be using 43-53% LESS gold than typical 18K gold jewelry - http://leancrew.com/all-this/2015/03/apple-gold/