Gold has been coveted by humans for millennia, but we still have no way to say just how much an ounce of the shiny metal is really worth. There is some research on the topic, but it still comes down to supply and demand.
The supply of gold is limited – limited by miners’ ability to dig it out of the ground and process it. While there is some ongoing demand for gold in electronics, the vast majority of it gold goes into jewelry, investment vehicles and central bank vaults.
What happens if a new supply of gold comes online? Not a new mine, but actual alchemy.
A company researching fusion energy, Marathon Fusion, believes that it could produce gold alongside energy.* Tom Wilson in the FT has the story. He writes:
“Marathon’s proposal is to also introduce a mercury isotope, mercury-198, into the breeding blanket and use the high-energy neutrons to turn it into mercury-197. Mercury-197 is an unstable isotope that then decays over about 64 hours into gold-197, the only stable isotope of the metal.”
While the science needs to be confirmed, it seems not out of the realm of possibility. If so, it has big implications for fusion energy AND the gold market itself.
Another industry is already facing pressure from an ‘artificial’ competitor. In past week both the WSJ and FT have published stories on the threat synthetic diamonds are to the traditional diamond industry. Jenny Strasburg and Suzanne Kapner in the WSJ write:
“Now diamonds can be made in labs that mimic the earth’s extreme pressure and temperatures, but for a fraction of the price. A decade ago, such man-made gems were novel. Today they are mainstream, and increasingly challenging the perception of diamonds as a luxury accessory.”
This is bad news for the ‘natural’ diamond industry, which is facing incredible pricing pressure. The industry’s response seems to be to double down on the natural aspects of traditional diamonds and hope that they can at least hold the high end of the market.
Nobody knows if large scale production of gold will eventually come online. Even if it does, it is years, if not decades, into the future. The point here is to think through the hypothetical impact of an abundant gold supply. For example, would gold still a be a store of value if it’s supply were dramatically increased? Would we find new and novel uses for a now abundant shiny metal?
If you were involved in the diamond business in 2016, and knew how the market for manufactured diamonds would mature over the next decade, you may have done things very differently.
What if the demand for clean, abundant power were to disrupt the market for gold? That would be a story for the ages.
*You can read Marathon Fusion’s research paper here.
