Wearable tech is a fast-growing area of the technology sector. The latest generation smartwatch 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 smartwatch space is a highly contested arena. One of the main areas of negative feedback with the first-generation smartwatches is perhaps that while they offered many functions, they werent necessarily everyones taste in style. Certainly, in their current form, demand from females is limited.
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Apple is 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. 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. Certainly, it looks set to achieve several goals in this market. No doubt offering three versions of the watch sports, stainless steel and gold, means they will 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 collectable. However, one of Apples greatest strategies may be under threat from the gold watch namely, capturing each customers loyalty to upgrade with each new version. After all, if youve spent 3,000 on a gold smartwatch, will you buy the new version every 18 months I think this is unlikely.
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 useable functionality so benefits wont be purely financial.
Theres a chance the watches may become collectors 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 clich that an asset is only worth what you can sell it for rings especially true with such specialist items. If the demand isnt there for the watch in the future, then the price achieved will suffer. Safety may also present an investment risk. While it may be easier to keep gold coins and bars safe from the thieves, wearing a 3,000 gold watch on your wrist may prove too tempting for some thieves.
Certainly, Ill 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 if we see Samsung and other competitors making copycat wearable tech versions. However, as an investment, I think its 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 youre better off buying gold coins or bars.
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.