To be honest, I can't see myself ever spending $10k even on an ordinary luxury watch, if I was in position to do so. Much less so with an electronic one that will most likely be obsolete in a year.
I agree, but the tech-savvy market slice isn't the target one. Don't doubt the mass appeal of shiny golden objects. These are jewelry first and foremost. The watches will end up impressioned on exponentially more eyeballs, I'd wager via celebrity appearances on TV, gossip sites, Instagram, Facebook, Twitter, etc., than the number of purchases of the actual watch. They will further cement Apple products as the status symbols that they've become. Even if only 10,000 are sold... at least 100,000,000 people will see them, and a good portion of them will clamor for the lower end one. $349 sounds like a heck of a deal when X celebrity is wearing the $10,000 one.
https://en.wikipedia.org/wiki/Pricing#Premium_pricing