As just about anyone with market knowledge can tell you, gold bullion pricing derives, ultimately, from the natural scarcity of gold. Oh, there are other market forces at play; but what really drives the price is simply the fact that there’s so little gold on Earth, and even less still in it.
At the moment, we’ve mined about 60% of all the world’s accessible gold deposits, and even that would make a cube only about 60 feet on a side. As long as there’s a consistent or rising demand, then, the price asked for bullion is going to go up and stay up.
Add the fact that we’re finding more and more uses for gold, and rising prices will continue to be a shoe-in…as long as new sources don’t flood the market.
Making Gold From Scratch
Believe it or not, it’s actually possible to make gold from scratch — if you have a nuclear reactor. Happily (at least for the gold speculator), that’s the only Philosopher’s Stone that actually works. Physicists know of several ways to synthesize gold, by transmuting either mercury or platinum.
The problem here (even ignoring the fact that mercury is still expensive and platinum costs more than gold) is that enormous amounts of energy are required to produce tiny amounts of gold. In the end, it’s many times more expensive to produce than it’s worth. But hey, proof of concept, right?
All joking aside, unless we have some startling breakthroughs in nuclear fusion, it’s very, very unlikely that anyone will ever directly synthesize gold from scratch in commercially viable quantities. Whew!
What About Nanotechnology?
Nanotechnology is a developing science in which researchers use microscopic machines to manipulate individual atoms and molecules. It sounds like science fiction, but it’s more likely to drive gold prices down at some point than direct synthesis is.
You see, while scientists haven’t gotten very far with it yet, nanotech seems very promising for a variety of uses. One of those uses is grabbing individual atoms from other material and piling them together. For example, if you could create a viable nano-machine, you could tell it to pull only gold atoms out of seawater.
There aren’t that many gold atoms in seawater, but there are some — and there’s a LOT of seawater on Earth, so you can imagine the possibilities if you put a few million mini-machines to work on it.
Alternately, you might sprinkle nano-machines on a pile of gold mine tailings, having programmed them to go in and find the tiny bits of gold or molecules of gold compounds that the standard extraction processes miss.
Using nanotech this way is still a long way out, even if it does become practical. And it could: with economies of scale it might work, once the original R&D was paid off. However, even if it does, all it means is more efficient extraction of existing gold, not synthesis of new gold.
This would certainly cause gold prices to nose-dive, at least temporarily. However, even if this scenario ever plays out, the demand for gold is such that the price would soon start rising again.
It’s very unlikely that either synthesis or super-efficient extraction techniques will destroy the value of your gold bullion holdings anytime soon — probably not in your lifetime. It could happen, but really, it’s about as realistic as us starting to mine gold from the asteroids. That is, it’s possible, but not very likely.
So don’t be too worried about new sources of precious metals eroding gold bullion pricing in the near future.