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.
Soure
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.
Source
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.
Source
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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Gold will probably be a bad investment but a great compliment to crypto. Crypto is all about inefficient redundancy. Security and trust over efficiency and output. Gold is the same thing.
It would also be a bad idea to invest in solar panels and greenhouses. We don't do it for the investment: we do it because it will be all we have left if the greater system fails. Of course I've already made this opinion clear like half a dozen times so maybe I'm just trying to convince myself :D
True but then solar panels and greenhouses have some utility. Gold might have some with electronics but the primary use case is the store of value. To me, that is dependent upon the scarcity. If the supply is radically altered upward, due to technology, isn't this gone?
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The scarcity will always be there, but yes there could be a huge bump in supply due to abundance tech that brings the value down. Personally I think demand will increase exponentially as crypto takes over and centralized systems continue to fail. In my opinion everyone should have like a 1 ounce gold coin in case shit hits the fan.
Well I am still bullish on gold but I do think crypto will out perform gold. But I don't know if all this new gold will really affect prices as much so it will be a wait and see. I made a little bit off selling off some covered calls on my gold mining stocks so I don't think I will take as much of a hit.
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Honestly, technology is taking over and we are creating invaluable stuff that could change how we live.
Gold is nowhere near that. It's another stone to me.
I cannot create something cool with it unless I am an artist. 🙄
Doge > Gold. Lol, Jk!
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gold is used by technology more and more. its a great conductor without oxydation problems. i bet you have a few grams in your pc.
with time the gold usage will move to more electronics and less investment
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That is probably true which will put gold on a different curve than it is now with the SOV built into it. Plus, then its value is based primarily on the utility which then depends upon the supply/demand breakdown even more.
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That's another great use-case of Gold @thedd. I will take those few grams in my pc!
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we tried it a few years ago, not worth it. in theory (or on a larger scale) you can get the gold with electrolysis. we just could not get enough to justify the equipment price
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The scarce nature of it doesn't make it a reliable source to meet the demands.
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I dont know if it is just another stone. LOL
But I get your point. There are things that can usurp what it traditionally has offered. That is the point of the article.
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Completely true even though I bet the Indian market will first swallow up so much gold to create a spike.
The high price will increase investment in those machines in a more massive scale.
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That is likely very true. The Indians are big into gold and will go hard into it. I would not be surprised for a spike in gold prices since it would follow the commodity cycle. Of course, as we see, they are short lived before the cycle heads the other way (a couple years).
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Your post was promoted by @yeckingo1
Not sure about this; your arguments are good, but I think the financial system is going to undergo a huge change in the next decade with digital fiat currencies coming. I guess the question is whether modern monetary theory will work or if people in the end will want to have it backed by something like gold. And of course also how successfully cryptos can replace the current model
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I would agree with you about the system undergoing massive change. Yet what you mentioned actually plays less into the idea of physical stores of value.
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Speaking of technology and mining. I will be interested to see how long it is before we are mining things in outer space. Based on your assumptions about the rate of technology growth it should be much sooner rather than later. That undersea rig is pretty awesome. Talk about game changing!
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We will be mining things in outer space, I am certain of that. It is likely within the next couple decades. That said, I do not see it radically affecting prices here since we will be dealing with two markets. Stuff mined in outer space will be used out there. If we are truly moving towards an inter-planetary species (something I question), then we will need resources out there.
After all, we are not going to construct building by sending up rockets full of 2x4s.
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That makes sense. I am also guessing the cost of getting it and brining it back would make it not worth whatever we are mining. Unless it is that unobtainium stuff from Avatar. That might be worth it :)
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Well I look at it this way:
Do multi-national corps bring the money back they make overseas?
They do not. They account for it naturally but it is resident in a bank or investments in the country it was earned. Same thing with commodity companies. They do not bring all their commodities back to their home country. They have it secured all over the world.
I do not see why this wont be any different. The materials will be owned by an entity, hopefully a DAO, but will remain where it is most useful. Hell they might pull it from space and store it on the moon, Mars, or another heavenly orb.
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except if we are able to mine asteroids and land them in deserts or shallow seas.
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You are right but my point is that Gold has been a mode of trade in the past. It was used as a currency.
But as world is going virtual, it maybe at risk. Crypto is replacing all physical currencies and it may replace Gold as well.
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I luv you man but gold is used in technology
"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".
What would the mining costs of such an operation be? Please subtract that from that estimate. I'm wondering if the Robots used to mine it have gold components?
We will diverge on this subject for sure! Cover all your assets. When lights go out I can't use debit cards or crypto. I can use cash and gold.
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Good evening, congratulations for your post, it is quite well elaborated and has very good arguments. I am going to give my opinion.
It is true your prediction about the marine robots that in case of being many and taking out in large quantities the gold would become common and its price would be devalued, but I do not think that will happen so soon, large companies always get the way to monopolize the market, and if they can not alone, they join with a couple of companies also large and make the monopoly the 3 together.
But come on man, I don't think they will distribute it to all humans and much less equally, although I understand that it is an assumption.
The truth is that I hope it takes a long time or that it does not happen, it would be a shame that gold becomes so common, not to mention the environmental impact it can have on marine fauna and flora, I'm almost sure it is a huge damage!
A hug and thanks for another very informative post.
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Although, another thing that I think could happen is that the market could split, I say this because they are already looking for another planet, a way to search for valuable resources in space and blah blah blah. scientists talking things.
But we'll see, I don't think it will take more than about 15-20 years to see this kind of thing. @taskmaster4450le
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Mining on the ocean floor sounds extremely expensive and until we see some real world numbers I'm skeptical if it's commercially viable. Also jewelry is a thing and I don't see gold being dethroned in that department any time soon.
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And not only in the field of gold or raw materials, but also in all areas of work, it will be seen that technology is cheaper and produces more, and thus collapses the market for the greed of people to have more and more.
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I think gold is still a great investment... At least when it comes to betting against Fiat currencies. Metals in general are better than fiat currencies. In my opinion, crypto and metals should be your primary investments.
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