After almost a decade of deep dives into material innovation in traditional watchmaking, we have finally come full circle. Way back in 2016, we published a longish treatise on gold in watchmaking, which is unsurprising given the popularity of the metal over the centuries. We write centuries here but really we mean the entirety of human history, written and otherwise, because contemporary timepieces are also pieces of jewellery. And so it should surprise absolutely no one that in this second take on gold, we will be outdoing ourselves. In fact, we already have because we published a preamble to this story in Spring this year.
The watchmaking business has always been about both style and substance. Timekeeping is, even today, primarily a utility that drives productivity, efficiency and accuracy – it can literally tell us our place in the universe, depending on how the question is phrased. As with anything this important, there is a symbolic value to be had. It is a value with both power and prestige, which the ruling classes have always understood. Thus, we have arrived at the simplest connection between time and gold.
Now, we will have to address the matter of price quite prominently in this story (and its constituent parts) but it is worth bearing in mind, from the outset, that price is just one of many facets. More than any other precious metal, gold has a certain reputation as a proven store of value, a hedge against both inflation and deflation, and a stable investment class. Gold and silver are the only precious metals to be widely used as both jewellery and currency, distinguishing them from other precious metals. Gold is especially relevant for this examination because there is only one wristwatch in silver today that is widely recognised.
Growing and Retaining Value
These are all complicated points and we will be covering them briefly. We bring this point to the fore because fine watchmaking has been in the public eye itself recently for the investment angle. Specifically, some types of watches might qualify as alternative investment assets. To be clear, we have always argued (or at least cautioned) against this but we acknowledge reality and there are many of you, dear readers, who are intrigued by the potential of watches to not only retain value but also to grow it.
Some years ago, before we dared to comment on the phenomenon of investing in watches, we hinted at what a dark world this might herald. It was an Editor’s Note with the catchy title Watches as Currency, and watches cased in precious metal are the personification of this idea. If gold, in particular, is a kind of currency, then wearing watches cased in this material will really be like having cash strapped to one’s wrist. Well, perhaps just a digital display that indicates how much the watch in question is valued at. A good way to grab the attention of thieves you say? Welcome to the world of those who rock all-gold watches, and Singapore might just be the safest place on earth to do this.
As a counterpoint, the watch-buying community knows all too well that the best deals available on the secondary market are timepieces cased in precious metals. That means any precious metal, not just gold. To be blunt, these are the types of watches that shed the most value, including examples from the biggest names in Swiss watchmaking. Generally speaking, the why of this is hard to explain, especially versus amped-up valuations on steel watches, but the hypothesis (from specialists, including us) is that the precious metal recommended retail prices have always been too high. This is especially true when any given brand also offers a model in a non-precious metal variant too.
Reversal of Fortune
The current environment, which has seen prices falling on the secondary market across the board while also registering record prices for gold (US$2,431.55 in April), is an interesting one. If brands are really forcing an ascent of the price-to-value peak right now, then we expect that a number will not make it to base camp. Pay close attention to the new precious metal models when they settle in at your retailer – or whenever you get the call with regards to something particularly desirable. If it is desirable, that is.
This is the moment that this introduction gets a little contentious because there is no inherent novelty in steel or gold cases. The great innovation of Audemars Piguet and Patek Philippe in proposing steel watches that were as expensive as the same in gold was mainly about price. As my peer Ruckdee Chotjinda once joked, the innovation there was the price. Enter Richard Mille
with ultra-contemporary materials at a price far beyond what the same watch would be in precious metals – it helped that no such watches existed, of course but the innovation here still hangs on the matter of price. As far as even the most exotic of gold options out there go, price innovation is difficult to achieve.
Now, this is not to say that something with a functional benefit, such as honey gold or armor gold and almost certainly magic gold, does not add value; it does. The limiting factor is the 18k standard, which is a regulatory matter. Steel does not have this issue, and of course the clever composites and alloys deployed by Hublot, Richard Mille and Panerai have no limits. So, in a way, this story argues at key moments that gold and other precious metals have to be brutally honest because they are being held to account. Pricing innovation can only go so far here, but it is certainly not absent.
Qualified Honesty
This (qualified) honesty has everything to do with why we buy watches. Watch lovers have always purchased mechanical watches for watchmaking content. Before you protest about marketing talk, we simply mean everything that makes any given watch literally tick. In the 500 years or so that mechanical clockwork has been with us, creating the housing for the mechanical bits and bobs has been trivial by comparison. Recall, for example, that it took until physicists Robert Hooke and Christiaan Huygens before springs could be used as regulators.
Remember also that Hooke and Huygens were working separately on different projects (Huygens was following up on his own invention of the pendulum regulator), and effectively building on Galileo’s foundational work with timekeeping. These scientists were all pioneering forces of their day, and their contributions – and those like them – represented the true value of time, as far as humans could measure it. In many ways, it still is; the precious metal cases and parts are just signifiers of this value. A well-made case in a precious metal is an indicator of the precisely engineered contemporary horological engine housed within. Indeed, such a case or bracelet might not be completely solid, just to keep the watch comfortably wearable. At this point, if you compare steel watch with a gold one, for example, you might wonder why then is the price jump so high…
Before we move on to these matters of value (in the section on the uses of gold in watchmaking), we do have to mention the issue of sustainability. Gold production has been in the crosshairs of activists for some years, especially the so-called artisanal mines. These are the non-industrialised mining activities of smallholders, which are somewhat obscured by statistics and figures concerned mainly with the largest producers. These, as any quick Internet search will tell you, are China, Russia and Australia as far as gold is concerned (and we will come back to this shortly).
Pricing Issues
Now, watchmaking is not the biggest user of gold in the consumer segment – that would be jewellery. But given that brands such as Cartier, Chopard and Bvlgari are all major players in the watch world too, the ethical issues regarding dirty gold cannot be easily set aside. We give the issue a brief mention in the section on the Responsible Jewellery Council (RJC) and the Dodd- Frank Act (2010) but we concede that the issue requires more in-depth work.
This brings us back to the value proposition and the lack of clarity in the matter of gold and precious metals in watchmaking. How much more should one pay for a watch in gold over the same in steel? Why is a watch cased in platinum endowed with a higher retail price when the raw material has been cheaper than gold since the Great Recession? As we noted in our special on platinum, this metal represents an opportunity for watchmakers to do interesting things but brands have work to do in making the case (no pun intended) for it. Intriguingly, this might include technical innovation because platinum remains tough to work with and that partly accounts for why the material remains underused in jewellery and watches.
Continuing on this admittedly dangerous path, there is also the matter of persistently high prices on the secondary market for the biggest and most desirable brands. Mostly, this has to do with steel models and said models often eclipse the RRP of their gold counterparts (or get perilously close to doing so). Thus, switching focus to more precious metal options is only logical, especially when one considers that the top two percent of the world’s high rollers account for a massive 40 percent of all luxury purchases (according to Bain & Co).
Pure Capital
As for power players, central banks are gobbling up gold like pandemic-spooked shoppers making a run on toilet paper. There is plenty of evidence for this, thanks to transparency laws and the like (therefore, see the news). Not for nothing, the Swiss consider gold a currency so the material is not subject to VAT and other seemingly relevant taxes. On the matter of consumer markets, anecdotal evidence suggests that some of the most important ones do not shy away from the precious stuff. This refers to Asian countries of all sorts, for those who might be confused; unhappily, there is not much separation between demand for investment purposes and for aesthetics. It is worth noting though that if you have bullion or coins, that is an investment. If your gold is in watches then that is something else.
This all adds up to a scenario where things are looking on the up for gold and its kin, whatever the price of the raw stuff does. Arguably, if you look at prices of precious metals and how it relates to watches, it has never been straightforward and has never needed to be – no one ever asked that watches cased in steel follow the price trends of the raw material. We do agree that this should be understood in the context of watchmaking content, as mentioned earlier, as long as that also includes branding.
This collection of stories about precious metals in watchmaking does try to stick to what is factual, for practical reasons, because we cannot add brand value into the picture in any meaningful way. That does not mean it does not exist and is not impactful. This one is entirely up to you, the would-be buyer. Some models look promising but only because you have already justified the premium to yourself.
Palladium
Used very sparingly in watchmaking, palladium is – like some other metals in these sidebars – a platinum group metal. In the periodic table, it is known by the symbol Pd, and its atomic number is 46. Palladium shares many of the same properties of platinum, including density and malleability. In fact, it is the least dense of the metals in its group and its melting point is the least extreme, although still high. It also shares the same catalytic properties that make it as appealing as platinum to industry, and it was the most cost- effective. In the recent past, palladium
ore prices have outpaced platinum, in turn putting pressure on platinum ore prices. Besides the problematic issue of most supply coming from Russia, important mines there had already been hit by environmental issues. As a result, palladium is estimated by some sources (Statista) to be 15 times as rare as platinum, which itself is just about as rare as gold. Since 2016, the price of palladium (per gramme) has increased fourfold; obviously, the effects of COVID-19 and the current conflict in Ukraine have not been factored in yet. On
the other hand, there is no good reason to use palladium for watches, since it is very similar to platinum but does not have the cachet of that precious metal. At the same time, it might also be a good deal more dear than platinum, because of industrial demand and various supply constraints. Among Swiss watchmakers, Ulysse Nardin, Audemars Piguet and H. Moser & Cie have used palladium in recent years. Interestingly, the bulk metallic glass (BMG) of the Royal Oak Jumbo Extra-Thin 15202XT for a recent (though not the most recent) edition of OnlyWatch featured palladium in the mix.
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