Friday, February 20, 2009

The Midas Touch

The popularity of Gold is based, in part, upon scarcity. Given the cost of mining Gold, supply and demand, we have the emotional aspect which has been driving the price of the precious metal up.

But, what if Gold could be "mined" at much cheaper prices? What would that do to Gold?

Clearly, it would drive the price of Gold lower.

Thermopower will be able to "mine" Gold at extremely cheap prices in the future by using an electrolysis technique to extract Gold.

If you're a long term Gold investor, don't expect to get rich. Gold is an insurance policy. Treat the cost of Gold as a cost of doing business. The premium you pay for Gold may be lost in the future when Thermopower becomes available to the public.

1 comment:

hmp49 said...

1) Extraction cost from ore is only one component in the cost of production. Mines have to be dug and ore extracted.
2) Gold is not like a crop that can be planted. There is a finite amount available.
3) The amount mined (or which can be mined) in a year is small compared to gold already above ground. So the price of gold affects how much is mined, rather than the price of gold being determined by how much is mined.
4) Most importantly, as stated earlier, the amount of gold is limited, while paper currencies can be infinite. Countries around the world are effectively printing money with no basis (or even borrowing in the form of bonds) behind it. So the value of gold is likely to increase compared to all paper currencies, if not immediately, over the intermediate term