THE ALCHEMY OF ROLEX

Before I begin, it is important to say that there are many factors that have brought the price of modern steel Rolex watches to the level that they enjoy currently. This article is meant as more of a fun, harmless investigation into the partial neglect of modern gold Rolex watches and the success of Rolex steel watches in regards to their value. There are several important factors in my opinion that have created the wedge between steel and gold prices. The first is depth of market. Many of the most desirable modern steel Rolex models are considered “entry-level” in terms of price and thus receive far more attention and have a larger buyer-base than gold models. The other would be the popularity and influence of steel watches starting with their integral nature to Rolex history and continuing today to the limited quantity supplied and the frenzy that this has created.

It is well-known that getting a steel Rolex from an Authorized Dealer (AD) is extremely difficult. There are many reasons for this – desirability of specific models, preference, wear-ability, etc. However, the intrinsic value of gold has been diminished within the modern Rolex watches to such a point, that it is not uncommon to hear of ADs offering a steel sport model as an incentive for purchasing a gold watch. With that said, the title of this article is misleading because Rolex is not turning base metals into gold. However, their steel watches without any precious materials are worth much more in many cases than the weight of gold is in the same form.

So what is the value of gold in a Rolex watch? For argument’s sake, let’s say that a gold Day-Date 40 or a Daytona on bracelet weighs 215 grams and that all gold models in 40mm are approximately the same (I know for certain that a GMT-Master 116718LN is 217.3 grams). That is equivalent to 7.58 ounces and the price of gold per ounce as I am writing this is $1,579.56. So that means the weight of gold for this watch is equal to $11,979.23.

Of course, this is a rough estimation due to the total weight of the watch including more than just gold (movement, dial, etc.). But the point is, the gold value of a 40mm Rolex is worth more than the retail price of a steel Submariner, GMT-Master II, and Explorer, and is nearly equivalent to a Daytona and Sea-Dweller. The Deepsea and Yacht-Master II are a few thousand dollars more expensive, but when speaking about the most desirable steel models, most would agree that the former grouping wins out.

As stated before, it is very hard, if not impossible, to obtain any of these steel models from an AD. So the values that make the most sense to assign to them are their secondary market prices. For illustration purposes, let’s take a GMT-Master II ‘Pepsi’ 126710BLRO. Market value is around $17,000. This easily eclipses the gold value of a 40mm watch and herein lies the alchemy of Rolex. A steel watch is worth more than the gold value of its equivalent model. There are obviously a number of factors at play here as I mentioned earlier, some of which are controlled by the retailer and many of which are not, but distilled down to a very, very simple comparison, steel is worth more than the value of gold when speaking about modern Rolex watches.

Now this is not comparing apples to apples as it is only comparing the value of a  precious metal to an entire steel watch. A more fair comparison would be to look at the same model of watch in steel and gold, both on bracelets. Let’s take the ‘Pepsi’ 126710BLRO versus its Everose gold counterpart, the reference 126715CHNR. The Everose GMT-Master II has a retail price of $38,250 and trades for around the same in the secondary market. We know the current, true value of its steel counterpart to be less than this, but still considerably more than its retail of $9,700 (just over 75% more). What is interesting is the considerable premium placed on the steel, while the gold doesn’t see any.

The most desirable Rolex steel watch in production is the Daytona with a retail price of $13,150. Secondary market prices are about $23,000 with a slight premium towards the white dial configuration. The closest equivalents would be the three gold models on Oysterflex bracelets because they also have ceramic bezels. The Everose, yellow gold, and white gold (116515LN, 116518LN, 116519LN) models retail for nearly the same price of approximately $30,000 and do not command much of a premium on the secondary market, if any at all. Again, the stark difference in value increase paints the reality of demand for steel versus that for gold.

There are other models such as the Submariner and Datejust with which this same phenomenon is true and there doesn’t seem to be many signs of these preferences changing. Within the jewelry business there has been a contraction of the diamond market in recent years. Similar to our case, there are many factors that have caused this from generational preference shifts to the growing popularity of synthetic diamonds. But I think the same overview can be reached and that is that the status of precious materials, and specifically gold, have lost their luster.

The fact that Rolex watches in steel are more desirable and worth more than their equivalent in gold weight isn’t groundbreaking news. I’d much rather have a watch (and a great one at that) to wear than a small amount of gold sitting in a vault. But the reality of it is that the Rolex brand has been elevated to such a level that they have achieved what alchemists sought to.