Should you buy Apple’s gold smart watch or maybe just buy gold?

11th March 2015

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Daniel Fisher, director, Physical Gold, gives his view on whether Apple’s new gold smart watch makes wearable tech fashionable rather than just functional.

The latest generation smart watch from Apple was unveiled at a launch event in California recently, with a raft of new models. The most exciting of which is their top end gold version available in either yellow or rose gold. The price of this model is rumoured to be around £3,000.

With the wearable tech market currently worth an estimated $7.1 billion with predictions for 2018 of sales hitting over $12.6 billion, the smart watch space is a highly contested arena. One of the main areas of negative feedback with the first generation smart watches is perhaps that while they offered a number of functions, they weren’t necessarily everyone’s taste in style. Certainly in their current form, demand from females is limited.

Game changer?

Apple are famous for taking products to the next level. In particular they recognise how to tweak a product to fully capitalise on the largest possible market and create universal demand. Clearly their announcement to produce the next generation watch in gold, signals their desire to evolve wearable tech from purely functional to fashionable. The watch now becomes a piece of jewellery as well as a piece of tech. It looks set to achieve a number of goals in this market and offering three versions of the watch – sports, stainless steel and gold – means they should appeal to the untapped female market and fashion-conscious male users. The options will appeal to more varied tastes and they may well sell several versions to each user as they become more collectible. However, one of Apple’s greatest strategies may be under threat from the gold watch – namely, capturing each customer’s loyalty to upgrade with each new version. After all, if you’ve spent £3,000 on a gold smart watch, will you buy the new version every 18 months? I think this is unlikely.

Will the watch be a sound investment?

Already market speculators are suggesting that the sheer scale of Apple and the amount of precious metals they will purchase to produce their watches should impact gold and silver prices. Predictions are for the price of both metals to be propelled upwards as silver will no doubt be combined with the gold content to strengthen the watch. With the gold price currently near to its lowest point in the past 2 years, the value of the Apple watch could rocket upwards. This in itself could act as a great store of wealth. Rather than having £3,000 failing to keep pace with inflation in the bank, it could be outpacing inflation in the form of an appreciating asset. Even better, the investment will provide usable functionality so benefits won’t be purely financial.

There’s a chance the watches may become collector’s items too, further pushing up prices. However, this element is unknown which means as an investment it becomes speculative. The risk is that with new versions likely every couple of years, older versions with out-of-date technology may in fact become less valuable. This brings into focus the issue with any investment of liquidity. The classic cliché that an asset is only worth what you can sell it for rings especially true with such specialist items. If the demand isn’t there for the watch in the future, then the price achieved will suffer.

I’ll be keeping a keen eye on the launch and response to the gold watch. It will be interesting to observe the impact it has on the gold price and whether we see Samsung and other competitors making copycat versions. However, as an investment, I think it’s risky due to the fast pace of the tech market. If you wish to capitalise on Apple pushing up the gold price but wish to own an asset as liquid as cash, then you’re better off buying gold coins or bars.

 

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