Future of Gold: Investing, Mining & Technology

[W3pcq]

Will gold be a valuable resource in the future? What kinds of technologies depend on gold, and is there enough demand for gold in areas other than jewelry?

Gold is always safe right, as an investment. When paper money loses it's value, gold won't right? Is that what is beginning to happen now?

I know that gold can always be smelted and recycled, but will there ever be a time when gold becomes more rare as it becomes harder to mine?

If gold is, or will be, in high demand, due to its use in technology, will it one day become an obsolete material?

 

[russ_watters]

Since gold is a commodity like any other, its value can't be said to be constant. Gold will always have an intrinsic value, so it is always "safe" to own, but safe doesn't automatically mean good where investments are concerned. Investing is all about risk vs reward. In fact, gold is generally considered a hedge against an economic crash, which means you don't expect the value to go up at all, you expect it to go down unless we ever have another great depression. Here's gold prices for the last 30 years: http://www.lenntech.com/prices/gold.htm It is worth something like 1/3 of it's peak in 1980. Since we're in a bit of a funk right now, it is going up, but once the market starts back up again, it'll go back down.

If safe is what you are interested, in, there are plenty of investments that are guaranteed against anything except complete economic crash (great depression type crash), such as bonds, cds, and savings accounts - and that actually do appreciate.

 

[Mike Cookson]

I think the price of gold will only increase. Gold wires are used heavily in connections inside silicon chips, effectively between the pins which come out of the casing and the actual silicone structure. With the increase of semi-conductor technology more gold will be needed for this application.

 

[russ_watters]

No, computer chips mostly use copper and aluminum wires. Gold is often used as a coating for electric connections because it doesn't corrode, but it isn't a great conductor, so it is rarely used for the actual wires.

 

[mgb_phys]

Gold is very useful if you think the person on your paper money is likely to be put up against the wall in the near future - say if you were in a middle eastern country beginning with I, it might be a good idea to have your savings in an easily transportable, untraceable and universally accepted form.

 

[Mike Cookson]

No, computer chips mostly use copper and aluminum wires. Gold is often used as a coating for electric connections because it doesn't corrode, but it isn't a great conductor, so it is rarely used for the actual wires.

I beg to differ, I'm not talking about what the actual pins are made from, it would be ridiculous to make that from gold, I'm talking about the thing wires that are internal to the microchip that connect the grown semi-conductors to each other an the pins.

 

[mgb_phys]

Gold is still almost exclusiely used for internal bond wires, between the IC and the package, but it only amounts to around 150t/year (2005) - total world production is aound 2500t/year.

 

[Mike Cookson]

Still getting on for 10% of global production within a few years...

 

[mgb_phys]

At the moment jewelry and money is about 85%, electronics 5% and dental/etc 10%.
Production is increasing, mainly because the high price makes uneconomic reserves suddenly valuable.

Gold is rather easier to find than say diamonds, like oil you can easily tell what kind of geology is likely to have gold - then it's just a question of wether the price / extraction cost is worthwhile.
The other big untapped source is mines in Africa / Russia that were abandoned as uneconomic 30years ago but with new technology and high prices are worthwhile. Even the waste piles of some of these old mines have a higher concentration than some operating mines.

 

[mulp]

Look at the mined quantity and market price for gold, plotted with some offset, say ten years, quantity lagging price. If the price stays high for a few years, you start expanding over a few years your mining capacity. As the price goes down you stop investing if the rate of return drops below your threshold which slowly reduces quantity produced.

Clearly the cost of mining gold is half the current market price, if not less.

Economists use voodoo to explain this while arguing markets are rational.

 

[mgb_phys]

Basically correct - there are complexities, it takes several years to construct a new mine agaisnt only a few weeks/months to start production on an existing seam.
Similairly there are costs with closing an existing operation.

Running a goldmine isn't necessary a "gold mine" even at todays gold prices the companies are making 10-15% operating profit, about the same as oil companies.

 

[Peter Hiatt]

In the early '80's, gold went from $850 down to $100/oz. Lots of people lost their shirts. You are wagering you are not in a speculative cycle. If oil suddenly drops, gold will drop some. As the dollar rises, gold will fall. The bottom line is that gold can decrease in value as well as increase.

 

[DrClapeyron]

Gold is an unproductive asset. The Spainish Empire was ruined because it looked for gold and silver while Britain looked to trade commodities and be productive. India in 1990 was nearly given the death sentence when it could not afford two weeks of imports and it sold gold to IMF to pay these debts.

For a central bank or company, gold is a bad investment. For individuals, gold may feel safe because the history surrounding gold seems to offer assurance that it will always be worth something. Gold is an unproductive asset.

 

[Helios]

Gold will always have an intrinsic value,

This is false. Nothing has intrinsic value as value is completely subjective.

 

[Mk]

This is false. Nothing has intrinsic value as value is completely subjective.

For some reason, you can go pretty much anywhere in the world, and offer them gold, and they will love it. It's shiny, it doesn't corrode, and it's malleable.

 

[John Newcomb]

For some reason, you can go pretty much anywhere in the world, and offer them gold, and they will love it. It's shiny, it doesn't corrode, and it's malleable.

Who doesn't love gold? Gold is universal - no matter what your currency is, no matter where you are, people will surely love it..

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[mgb_phys]

Who doesn't love gold? Gold is universal - no matter what your currency is, no matter where you are, people will surely love it..

The same goes for kittens however few countries have adopted them as a basis for their currency

 

[kay_norton]

Gold will definitely affect us in the next few years to come.. Not just that, but even in the next decades and even centuries.. Although it may be true that the prices of gold gets down every single year, no one even knows if it will totally lose its value.. That remains as a theory - and until proven, it won't happen..
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