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Money Metals News Alert
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November 11, 2024
– Gold and silver had a rough week and are trading more than 2% lower this
morning as well.
The Federal Reserve note "dollar"
strengthened on news of Trump's election landslide, and traders pocketed some
profits on their winning precious metals trades from the past couple months.
In the context of the ongoing gold and
silver bull market, though, the current pullback in prices appears healthy.
Fundamental drivers are still in place, at least for now.
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Gold : Silver Ratio (as of
Friday's closing prices) – 86.8 to
1
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Gold Demand in Tech and Industry
Up in Q3
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Gold is fundamentally money, but there
is demand for the yellow metal in industry and technology.
Industrial and tech demand accounted
for 83 tons of gold in the third quarter, a 7 percent year-on-year increase. It
was a 2-ton increase quarter to quarter.
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So far, in 2024, about 245
tons of gold have been consumed in industrial and technical applications.
The vast majority of
industrial gold demand comes from the electronics sector. Sixty-nine tons of gold
was used in electronics production in Q3, a 9 percent increase on an annual basis.
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The three major Eastern electronics
fabrication hubs all reported an annual increase in Q3 gold demand:
- Japan - 20 percent
- South Korea - 20
percent
- Mainland China and Hong
Kong SAR - 10 percent
Meanwhile, U.S. electronic
manufacturers recorded a 4 percent year-on-year decrease.
All the major smartphone companies
unveiled new products in Q3, and smartphone shipments increased for the fifth
consecutive quarter, but according to IDC, a market intelligence company, the
industry is taking a "cautious" stance for the remainder of the year with some
emerging signs of economic slowdown.
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On the positive side of
the equation, the ongoing adoption of 5G and a push for AI-enabled phones lifted
gold demand in the wireless sector.
AI is the primary growth
driver in the electronics sector, and it pushed another strong quarter in printed
circuit boards (PCBs). Automotive electronics also use high-end PCBs to guarantee
reliable operation in safety-critical functions.
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Low-earth orbit satellites are also
increasing demand for PCBs. According to the World Gold Council, the proliferation
of satellites for communications and internet service may represent a potential
long-term source of demand for gold from both PCB and wireless components.
Gold is also an input in the
production of light-emitting diodes (LEDs). The amount of gold used in this sector
increased modestly in Q3, fueled by increased adoption in the automobile sector.
Other industrial applications used
about 12 tons of gold in Q3. This was almost identical to the Q3 2023 offtake and
up 1 ton over the second quarter.
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Warren Buffett once said, ???Gold gets
dug out of the ground in Africa or someplace. Then we melt it down, dig another
hole, bury it again, and pay people to stand around guarding it. It has no
utility. Anyone watching from Mars would be scratching their head.???
You???ll often hear this notion that
gold is ???useless??? from commentators on mainstream financial networks.
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As you can see by the
growing demand for gold in technology and electronics, this is just silly.
In fact, gold is one of
the most useful metals in the world. Due to its utility coupled with its scarcity,
gold is also one of the most valuable metals in the world.
In the first place, gold
is beautiful. That???s why people all over the world love to wear gold.
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About three-quarters of gold demand is
for jewelry production. About 479.4 tons of gold were used in jewelry fabrication
in the second quarter alone.
But gold isn???t just pretty. Gold's
inherent physical and chemical properties make it useful in many industrial and
technological applications. Gold doesn???t corrode, it is an exceptional electricity
conductor, it is malleable, and gold can be used to catalyze many chemical
processes without being consumed.
This is why we see gold increasingly
used in the tech sector. In fact, gold would probably be used even more if it
weren???t so rare and expensive.
Gold is also important in the medical
field. Its inherent stability and unique optical properties make it perfect for
use in diagnostic testing. The World Gold Council said that gold is ???at the heart
of the hundreds of millions of Rapid Diagnostic Tests (RDTs) that are used
globally every year.
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???This
well-established and critically important technology has changed the face of
disease diagnosis in the developing world over the last decade.???
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Gold nanoparticles are used in testing
for malaria, HIV, hepatitis, and other illnesses.
Gold has even been used in some exotic
applications. In 2018, a team of Chinese researchers partially
restored the sight of blind mice by replacing their deteriorated
photoreceptors – sensory structures inside the eye that respond to light
– with nano-wires made of gold and titanium.
The point is gold is far from useless.
But fundamentally, gold
is money. And everybody wants to have money - especially real money.
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This week's Market Update was
authored by Money Metals Contributor Mike Maharrey.
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