Gold Could Be Done As A Store Of Value Within The Next 100 Years
Introduction
Humanity has created forms of money to facilitate trade and to store value since time immemorial. The exact form of money used by each culture has always been a function of the level of technological sophistication of that culture.
The most important quality of money is its salability across time and space. For that, a form of money has to be
- durable
- recognizable
- scarce
- impossible to counterfeit
- divisible
- fungible (one unit is equal to any other)
- have inelastic supply (if demand increases supply is hard to increase)
Even primitive cultures have used forms of money to fulfill the basic roles of money, which are:
- store of value
- medium of exchange
- measure of value
Typically, primitive cultures have used rare types of seashells or stones or processed skins of animals that are hard to capture or things of that nature. On one Polynesian island, large and practically immobile blocks of stones called Rai stones were used as stores of value. The people of that island used an accounting system to keep track of who owned how much of the stones. But the basis of their monetary system were the stones which were scarce and impossible to steal.
Typically, encountering a more advanced civilization in possession of the means to overproduce the form of money used by a primitive culture led to the erosion of the value and thus usefulness of their form of money.
Along with the invention of metallurgy, ancient agricultural civilizations adopted gold and silver as the basis of their monetary systems across the world.
Exponential gains in technology will likely make gold abundant in the next 100 years
By Astronomical Institute of the Charles University: Josef Ďurech, Vojtěch Sidorin - http://astro.troja.mff.cuni.cz/projects/asteroids3D/web.php?page=db_asteroid_detail&asteroid_id=109, CC BY 4.0, https://commons.wikimedia.org/w/index.php?curid=32199126
Gold is a rare noble metal - that is, rare on Earth and using current mining techniques. 16 Psyche is an asteroid orbiting the Earth in the asteroid belt between Mars and Jupiter that is estimated to contain $10,000 quadrillion worth of minerals including vast quantities of gold. NASA is planning to send a probe to 16 Psyche in 2022.
While bringing the asteroid back to Earth is impossible and the mining technology to exploit it does not exist, it could be used in the colonization of space in the future. If 16 Psyche and other asteroids are mined in the future, side streams of minerals could be dropped to the Earth. It's possible to decelerate the shipments using the gravity of the Sun and the planets. Technology required to profitably mined the seabed or the seawater itself could be improved to make them competitive.
Conclusion
It's possible that the advancement of technology could make gold worthless as a store of value in the next 100 years just like technology used by more advanced civilizations has made stores of value used by less advanced civilizations worthless.
Computational power will always be scarce, which means that a synthetic form of scarcity (=store of value) could replace precious metals over the long term.
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We have another angle to consider in this. In the United States, it is estimated that $70 trillion will move from the Baby Boomers to the Millennials over the next couple decades.
In surveys, it appears the Millennials favor Bitcoin by a 9-1 margin over gold. This could cause an interesting shift where human desire changes.
Bitcoin could end up usurping gold very quickly and then start outpacing it. If governments start to indulge in BTC as a store of value, it might be game over.
Gold could be replaced in the next couple decades simply because people change what they value.
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That's a very likely scenario, in fact. Time and again Millenials and younger tell pollsters that they prefer Bitcoin to gold.
Demographic or generational shifts can be very powerful.
When the younger generation views something as not "cool" or for their parents, they tend to forge their own identity.
Gold is certainly a Boomer asset while the younger ones have embraced as BTC as theirs.
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This is a very likely scenario indeed. As well articulated above, computational power is likely to be the new form of scarcity. Frankly, much of the older generation doesn't understand the concept, let alone grasp the changing economic and social paradigms that we are rapidly undergoing. Bitcoin, simply by its place as the first, is likely to be entrenched as an institutional investment. The evidence is stark, with Reserve banks printing money by the Trillions for Corona relief, it is BTC that is outpacing Gold for 2020... that is a bullish sign for the future of the space.
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That Bitcoin should grow past gold in market cap in the next 5-10 years is also likely to happen but it has little to do with the scenario discussed in the post.
Meanwhile using it to store value is quite great but then in the future there might be other better ways to store wealth. But then I still believe gold is solid and will remain valuable for a long time
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I think Bitcoin is on its way to becoming a mainstream store of value.
Think about it, central banks have nothing but Gold to hold on to the power they have, everything else they own is worthless useless junk. Gold is going nowhere.
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If you look at the total value of fiat money in existence, you'll find that the market cap of gold, which is $7 trillion, is minuscule compared to that.
Fiat is valuable because of one thing: legal tender laws. Legal tender is the path of least resistance for any business to operate in because of three reasons:
Scarcity is key to gold's value proposition. Once gold's scarcity ends, it will go the way of Rai blocks or sea shells as a store of value.
Its not really scarcity that gives gold its value its the cost of extraction. If they mine asteroids it means nothing if it costs a trillion dollars to do it. Gold is only in trouble if it becomes cheap and easy to extract loads of it. Its just not going to happen. This idea of space being the next frontier is a pipe dream. Its a baron waste land the sooner we forget about the better.
Yeah, I know what you mean. The stock-to-flow ratio.
16 Psyche is not 100% gold. It contains extremely large quantities of other valuable metals, too. I'm talking about mining everything it contains and producing gold as a side stream.
With today's technology, absolutely. This is the reason why I gave it 100 years. I think it would be a mistake to underestimate accelerating gains from technological development. The whole thing would be fully automated, of course. Self-replicating colonies capable of producing anything they need powered by machine intelligence. Once the capability to do it existed, it would inevitably get done. Space is the ultimate high ground.
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But.... that would mean having to fix the world that we have - and we are messy children who don't like to clean our room.
yeah i think we should learn to respect it. If we dont and die as a species we deserve everything we get IMO. Only way we conquer the galaxy is if we amalgamate as machines. I do believe they are obsessed with this idea mainly because they want to live eternally or to make us work tirelessly for them. If this does happen Gold and most things here wont mean a thing by then.
I have never understood the desire to beat death, as it destroys the point of life. I think vampire movies are a good indicator of what many would do with eternal life... Hide from life in a high school dating teens, rather than spending eternity solving the problems we face. No wonder people hate them, they take their time for granted, whereas to us it is precious because it is limited. And of course the feeding off us...
I am unsure of we will be able to come together in time to save the conditions we need to survive on this planet, but working toward it is more interesting a life than against it.
Technology advancement might later do gold good in the future years to come or might later do bad also. But the unfortunate thing is that nobody knows
Value and availability don't always correlate, especially where derivative markets exist and free markets are put in a choke hold. Physical silver is a great example, as is Gold. But we're still in good times, contrary to what it feels like. The true stores of value are determined when bad times come and resources like food become scarce. That's when silver and gold show their true value. People like to remember the days when gold and silver were treated as money, but those times were also hard and resources were scarce.
Also worth noting is that a lot of silver and gold will get used up in space flight componentry, so the mining of gold asteroids/planets may not have the effect on scarcity that one might conclude. When it comes to resources, we humans are incredibly proficient at expanding to meet a growing supply. Finding new gold deposits in space will lead to the production of larger exploration fleets, and a larger demand for gold to meet that need.
It's interesting how the "new paradigm" talk always comes around when Bitcoin is seeing it's price go up. In reality, the price of Bitcoin today and the price a year ago are both purely speculative, and speculation is like Icarus, who always flies too close to the sun. The moral of the story is to take your profits instead of trying to catch the peak.
If it gets that bad, I think we have bigger problems that debating on the supreme store of value.
I'm afraid this argument does not water. 16 Psyche is about the size of the state of Massachusetts. It's thought to be the exposed metal core of proto-planet. The difference in orders of magnitude we're talking about is by no means small in comparison to the demand from building space flight components. They use extremely thin films of gold on them whereas the celestial body in question has a diameter of hundreds of kilometers. The availability of gold is not a limiting factor in the building of spacecraft and never will be.
I think the gist of the matter is that the world will always have demand for something scarce to function as a store of value. History shows that the ability of a form of money to function as a form of money is determined by the technological sophistication of a society. At some point, the technological sophistication of human civilization will render gold incapable of functioning as a store of value.
I thought it might have been a little far fetched as people like gold, it's tangible, shiny, pretty on jewelry and seems to be held in high regard but as someone who used gold coated things at Uni in my own metallurgical work, it's just a metal at the end of the day for me!
However, as you said, with the advancements of technology and shift in thinking to this new digitised world, it will start to make things that we once thought valuable, less so. It will be interesting once the generation shift happens in the workings of the world as companies have more than 50% Gen Y (millenials) and younger population... You might be right there.
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That was Taskmaster's position first and foremost but I think he has a point.
Gold has a had a several-thousand-year run as the #1 store of value. But when you consider the composition of the entire solar system and humanity's exponentially growing technological capabilities, I'm inclined to think that its run is about to end sooner than we think.
Ah yes, just seen his comment about it now!
Oh man, you're making me want to blow the dust off my space science research dreams and explore that avenue again! There's so much exploration that can be done and discover new materials that we can harness the power of! Thank you!
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The argument of what are people aged 21 and under going to buy as a store of value over the next 50 years; Gold of Bitcoin? is one I make often.
Gold as a store of value will become less and less prominent as we become a more digital society as the "norm"
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That's my wager, even without considering asteroid gold. Physical gold has a market cap of only $7 trillion. Bitcoin's sits at $0.3 trillion at the moment. It would be no large feat for BTC to exceed the market cap of gold in less than a decade.
Considering even the moon landing was fake, I'd say fat chance of NASA ever probing anything - bunch of clowns!
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https://medium.com/the-bitcoin-times/bitcoin-and-the-tyranny-of-time-scarcity-1d1550dfd8b0
;)
https://twitter.com/BBongrips/status/1328454352567230465
I doubt gold holders are worried about space mining. The costs are just too prohibitive as long as we still rely on rockets to get into outer space. I don't care how good rocket technology gets. Anti-gravity would be a game changer obviously but that's still in the realm of science fiction only and I doubt will happen in my lifetime (sadly).
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You're looking at this from the wrong perspective, IMHO. What I had in mind was a long-term push for the colonization and exploitation of the solar system. While I did not think of anything as fancy as anti-gravitation, I certainly did not have sending rockets to the asteroid and mining it using anything even remotely like today's technology. I was thinking completely autonomous mining complexes that would bring with them everything they need. The purpose of the mining would be to produce raw materials needed in the colonization and exploitation the outer parts of the solar system. Whatever gold were obtained as a side stream, could be dropped to the Earth's orbit along with anything else.
The context here was evaluating the longevity of gold's multi-millenial run as the primary store of wealth.
I'm not that worried about it, maybe in 200 years when we are on other planets. I wish I could know what happens, that is my wish, to come back every 50 years for a few days to live in the future.
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I'm a silver and gold stacker, so I'm blind to any point of view that makes gold worthless in the distant future. With that disclosure out of the way, I must say your post brings up a great point of view and the comments left here are very interesting for me.
GREAT POST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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I don't think you have to worry about your investment in precious metals any time soon, IMHO. The topic of the post was the long-term prospects of gold as a store of value. It does have a multi-millenial run behind it.