The Future Of Gold: Not Great
To* bet on gold is to bet against technology.
And that is a side you do not want to be on.
Gold is a traditional store of value. It was the symbol of wealthy for thousands of years. Throughout human history, the precious metal was sought after. Wars were waged and a lot of blood shed. Even today, it is still a highly prized commodity.
However, the luster is going off the leading precious metal. We are about to see this trumped by technology. Like most commodities, eventually they succumb to innovation. Gold is no exception.
Commodities operate on a supply and demand scale. There is nothing that better exhibits this other this this class of assets. It is why they are cyclical, experiencing waves that goes in certain time frames. When one side gets out of kilter, the other can be adjusted to bring things back into equilibrium.
With gold, the scarcity of the metal makes it so that the supply is always rather limited. This was its advantage over everything else. In fact, we see this with many commodities.
There is no better example of what technology does to a commodity than to take a look at oil.
In the 1970s, we had an oil shock due to price increases. At that time, we were to primitive with our technology to counteract it. That was not the case in 2008-2009, when oil spiked to $140 a barrel.
Here is the chart for crude oil over the last 25 years.
We see the spike up and the collapse as the economy got crushed. As things started to recover a bit, the price of oil headed higher. Yet notice what happened in about 2011. The price stopped going up.
And do you know what happened at that time? Fracking.
Horizontal oil drilling became a thing and flooded the market with oil. This sent the price falling. Even are the commodity bottom in 2016, oil did not get back to its previous peak.
This chart shows how this commodity is making "lower highs". Right now there is a run on commodities and oil is still below the prior high in 2018. We will see if it gets there. Odds are, if prices go much higher, the frackers will kick things into overdrive again.
Either was, this chart shows the impact technology can have on a particular commodity.
So what about Gold?
It is time to meet this bad boy.
This is Pantania II from Global Sea Mineral Resources. It is an underwater mineral mining device that could revolutionize the supply of previous metals that we have access to. This robot can operate in depths up to 4,500 M.
And where is this right now? It just completed a test run on the ocean floor.
Patania II—Global Sea Mineral Resources’ (GSR’s) purpose-built prototype nodule collector—is currently being trialed in 4500 m water depth in the Clarion Clipperton Zone (CCZ) of the Pacific Ocean.
GSR will only apply for a mining contract if the science shows that, from an environmental and social perspective, the seabed can be a responsible source of the primary metals needed for population growth, urbanisation and clean energy transition.
Obviously, this underwater robot is not focusing upon gold specifically. However, it is not going to shy away from the metal if it comes across it. This is designed to get metals out from the ocean floor, areas that are presently unreachable.
And if one company finds it viable, bet the house that others will follow.
How would the supply change if there were a couple dozen of these types of robots traveling around the floors of the oceans? We would see a huge amount of gold pulled up.
For years people knew there was plenty of gold at the bottom of the ocean. Shipwrecks aside, there is gold that has never been touched by humans. Technology is advancing so that we might be able to pull that up soon.
Could this radically change things in a decade. It probably can. The forecast amount of gold is increbiel.
From a 2016 article in National Geographic, we get this:
There is enough gold on the seafloor to give every person alive nine pounds, scientists estimate. That would be worth about $150 trillion, or $21,000 a person.
If this is true, 9 pounds of gold at today's prices is over $250K per person. Of course, with that much gold hitting the market the price would collapse.
We are not going to get 100% of the gold that is out there off the ocean's floor. There naturally comes a point where it simply is not worth it to mine it. However, technology tends to drop in price as time goes by. If there is a run up in the price of gold, to say $3,000, we could see it become profitable for robots like this to be unleashed.
And just like the frackers in the oil industry, they could cause a lot of disruption to the supply, which would radically affect price.
The further advanced we get with technology, the tougher the time commodities have standing up to the progress that is being made.
Another decade or two could completely change the entire picture as it pertains to gold.
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