I’m a big fan of the fact that the gold supply is severely limited, and no doubt you are too. After all, that’s one of the things that makes gold worth investing in.
Another is the fact that aside from its popularity as jewelry (the fate of two-thirds of the entire supply), gold is an incredibly useful industrial metal. Among other things, nothing conducts electricity better; it doesn’t tarnish; it’s a good chemical catalyst; and it even has medical uses.
We’re finding more and more uses for gold — so many that commercial uses are increasingly eating up the estimated 2,800 metric tons mined annually. Even though each individual iteration requires tiny amounts of the metal, it all builds up over time.
Now, add to that the fact that about 60% of all accessible gold is already above the ground and in circulation. Gold is getting harder and harder to find, and it costs more and more to produce. As an investor, all that should make your heart flutter with joy.
The Point Here
Gold bullion in all forms will eventually become more valuable as a natural process of demand exceeding supply. Even if we melt down all the gold jewelry and teeth for more practical uses (which will never happen) we’re eventually going to run short.
The only way that will change is if we find some cheap, plentiful alternative (haven’t yet) or we somehow increase the gold supply. The latter isn’t likely to happen in the foreseeable future — but do you know why?
Part of the problem is that gold is simply vanishingly rare. Like any element heavier than iron, it can only be forged in the fires of a supernova: the explosion of star much larger than our sun. This seeds the surrounding cosmic dust clouds with a tiny percentage of gold atoms.
Eventually, those dust clouds collapse under their own gravity to form new stars and their planets. Now, a planet the size of Earth is a pretty big place, and even though gold is very rare, scientists have estimated that if it had stayed on the surface of the proto-Earth, it would have formed a layer about 13 feet thick.
So far, the extant above-ground gold supply is enough to make a cube about sixty feet on a side. So what happened to that 13-foot layer of gold plating? Where did it all go?
Simple enough: While the Earth was still molten, it sank to the world’s core, along with most other metals. At best, only a trace remained in the crust.
And here’s something interesting: according to a paper recently published in research journal Nature, the gold we mine isn’t native to Earth anyway. Apparently, there was a rain of meteors around 200 million years ago that gifted the world with all our accessible sources of precious metals.
That’s wonderful news for investors, because it means that once we’ve mined out those accessible deposits, there won’t be any “new” gold until we a) learn to whip it up cheaply in a nuclear reactor; b) figure out how to drill down to the Earth’s core and mine it; or c) go out into space and find the source of those meteors.
While I’m as optimistic as the next guy, I don’t see how we’ll be able to manage any of those things profitably in the next hundred years. They’ll happen, I’m sure — but not yet. So invest in gold as much as you can, because the gold supply isn’t likely to expand much farther anytime soon.