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A large fraction of gold mined every year is used for its material properties in industrial and electronic applications. That presents a very real floor on pri
by Retric 9mo ago
A large fraction of gold mined every year is used for its material properties in industrial and electronic applications. That presents a very real floor on price. If good was suddenly worth 1/10th as much we would use it in far more industrial applications thus driving up the price. Similarly mining would slow down from the current ~3,000 tons annually again driving the price up.
Gold is currently priced way above that level, but just like the stock market were dividends allow people to buy more stock when the price is low there is a very tangible feedback loop propping up the price which eventually kicks in.
Counterintuitively this means using gold as an investment vehicle makes the world a worse place because we fall back to less efficient methods in industry, and efficiency is ultimately the engine of progress.
- tasuki 9mo ago> A large fraction of gold mined every year is used for its material properties in industrial and electronic applications. I thought that was less than 10%. That's a very low floor! (That said, gold is sound money)
- Retric 9mo agoHence why I said at 1/10th the price we would use a lot more of it. There’s easily decades worth of industrial use in vaults so the instantaneous floor is quite low. However feedback occurs well before you hit the actual limits here.
- sigwinch 9mo agoI read 7% of 2024 demand is industrial. Gold ended 2024 at $2600.
- Retric 9mo agoRecycling jewelry to make more jewelry is quite common, which kind of distorts how much the gold supply vs reserve is. If demand to manufacture jewelry ends then the supply of recycled jewelry also dries up. ~3,300 tons where mined in 2024 “Industrial and tech demand accounted for 83 tons of gold in the third quarter” of 2024. 83 * 4 = 332 so ~10% which is fairly typical.
- coffeebeqn 9mo agoGold is also one of the best heat conductors so if it got really cheap it could be used a lot in industry and electronics. Anything from cookware to heat sinks!