It's been a rough six weeks for gold, with the precious metal dropping 11 percent to $1,164.20 an ounce recently amid concern about the rising dollar and potential interest rate hikes by the Federal Reserve.
But Apple may soon provide some support for gold. The company could need large amounts of the commodity for its 18-carat luxury version of the Apple Watch,
CNBC reports.
Each gold watch could include two ounces of gold, experts estimate. That means Apple may be a buyer of 746 metric tons of gold a year, equivalent to about one-third of annual global mine supply, according to bullion dealer GoldCore.
Experts estimate that Apple has ordered between 5 million to 6 million watches. And the gold edition is thought to account for one-sixth of the total, GoldCore research director Mark O'Byrne wrote in a commentary obtained by CNBC.
To be sure, with a price of $4,000 estimated as a minimum for the gold version, Apple may have trouble selling 1 million, O'Byrne said.
As for the factors weighing on gold, most experts expect the Fed to begin raising interest rates around mid-year. Rising rates hurt the precious metal by putting a lid on inflation. Gold is often used as a hedge against inflation. Consumer prices actually fell in the 12 months through January.
Meanwhile, the dollar has soared to multi-year highs against a range of currencies in recent weeks. On Friday, the euro plummeted to an 11 ½-year low of $1.0842.
A rising dollar hurts the precious metal in two ways. First, gold is priced in dollars, making it more expensive in foreign currency terms when the dollar climbs. Second, an ascending dollar curbs U.S. inflation by making our imports cheaper in dollar terms.
"Gold has been moving in exactly the opposite direction to the dollar and acting as a currency hedge over the last few weeks," Paul Nolte, a portfolio manager at Kingsview Asset Management in Chicago,
told The Wall Street Journal.
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