A Tale of Two Festive Favourites

Diwali is almost here! Speaking of the festive season, can you guess India’s top two favourites during Diwali? Take a moment… we’ll give you 10 seconds.

If you guessed gold as one of them, you’re absolutely right! Gold becomes the talk of the town during the festive season, thanks to its deep cultural significance. But there’s another player in the game, quietly rising through the ranks.

This one might be a bit trickier to guess. Here’s a hint: it’s one of the hottest-selling items during the Grand Diwali sales.

If you guessed iPhones, you’ve hit the bullseye! Apple knows that in the final months of the year, people tend to splurge a bit more, which is why they schedule those much-anticipated new releases from October to December. 

So it’s no surprise that iPhone sales during the first week of festive sales in October 2023 crossed a whopping 1.5 million units, according to data from Counterpoint Research. That’s roughly 20% of the total iPhones sold in the entire year – all in just a week! (In 2023, Statista estimated that Apple shipped around 6 million smartphones to India.)

But why are we connecting gold and iPhones in the same breath? Well, for one, both have tremendous demand during the festive season, and they share a fascinating link that we’ll explore today. Let’s dive right in!

📲 More than just a smartphone

In 2015, Benedict Evans, then-partner at VC firm Andreessen Horowitz, said:

“There is absolutely no technical reason why Apple could not make a great iPhone and sell it for $300 or so today.”

Benedict Evans

Status game: Apple has chosen not to make the iPhone cheaper because it is more than just a phone. It’s a symbol of luxury, akin to designer fashion brands. In the past, status came from things like fancy clothes or cars, but now, it’s all about having an iPhone. If Apple reduced its price, the iPhone wouldn’t feel as exclusive.

But Indians are known for their bargain-hunting behaviour, right? Yet iPhones continue to sell well despite the high price. Why? Indians value status and are willing to invest in products that set them apart from a crowd of 1.3 billion.

Easy financing: Apple’s sales in India have also skyrocketed with the availability of easy financing options and EMIs. This made it possible for even those with modest incomes to own an iPhone, even if it meant buying it on credit.

Now that we understand why iPhones are both a luxury and a favourite during the festive season, let’s explore their connection to another beloved asset during Diwali: gold.

📱🥇The iPhone Gold ratio

Ever heard of the ‘iPhone Gold ratio’? It’s a fascinating concept presented by Incrementum AG in their ‘In Gold We Trust’ report. Essentially, it measures the iPhone’s price in gold, telling us how many ounces of gold it would take to buy an iPhone throughout the years.

Here’s where it gets interesting: the very first iPhone in 2007 would set you back 0.92 ounces of gold. Fast forward to 2022, and the iPhone 14 Pro is priced at 0.87 ounces of gold. 

Wait so did the iPhone get cheaper? No! In fact, its technical features have only improved

massively over the last 15 years, thus increasing its prices. iPhone prices have risen 150% since 2007, from $599 to $1499, with an average inflation rate of 5.9%. 

“Another analysis done by Self Credit Builder, reports that the price of flagship iPhones have risen an average of 7.04% per year in price from 2007 to 2022, compared to purchasing power which has risen 4.35% per year.” 

However, as a gold investor, you now need less gold to get a better iPhone because prices of gold have increased higher than the price of iPhone has increased over the years

But why does this matter to you? It’s not about buying iPhones with gold; it’s about what this tells us about gold as an investment.

📈 Why Gold Continues to Be A Popular Asset

To the moon!: Gold’s price has historically trended upwards, especially during market turbulence. During the festive season, demand surges, and people buy gold for Diwali and Dhanteras. Plus, it’s prime wedding season, so even more gold is in demand. Just in the last month, gold prices have increased by 8%, according to media reports.

Inflation hedge: Gold serves as an inflation hedge due to its intrinsic value stemming from industrial and consumer uses, its limited supply, and its status as a globally recognized and tradable asset. Unlike fiat currencies, gold’s value remains relatively stable during times of inflation, ensuring that it retains its purchasing power, and making it a preferred choice for investors looking to protect their wealth from inflation.

Safety first: Gold often moves in the opposite direction of the overall market, performing well during market volatility. This makes it an effective hedge against equities, helping to mitigate losses and navigate market corrections.

🪙 In a Nutshell

While iPhones are a great investment if you love them, gold can be an even better one. Whenever global stability is shaken, like during the current Israel crisis, investors tend to seek safety, and gold is a no-brainer for that. The factors impacting gold prices in the future seem to align, making a compelling case for gold.