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Gold, traditionally considered a safe-haven asset, has surprisingly rallied alongside riskier investments this year. According to Schiff Gold, a precious metals dealer founded by economist Peter Schiff, the yellow metal still has room to grow, and one reason might surprise you: its increasing use in technology.
The Tech Connection: Schiff Gold argues that precious metals like gold are more connected to technology than most people realize. Many tech products rely on gold as a key component due to its conductive properties.
For example, Nvidia, a leading graphics processing unit (GPU) manufacturer, uses in its products “conflict-free” gold as well as tantalum, tungsten, and tin from the Democratic Republic of Congo and “adjoining countries that do not finance or benefit armed groups in the region.”
Why Gold? While other metals like copper are generally cheaper, gold’s unique chemical properties and natural durability make it a desirable choice for certain applications. Despite the higher cost, some companies use gold in chips, internal wiring, and switches.
Looking Ahead: Schiff Gold anticipates a rise in gold usage within the tech sector. “As competition for the best GPUs heats up and the price of GPUs is likely going to rise due to advances in artificial intelligence, the cost of the metal in GPUs will become less relevant,” it said.
Currently, gold primarily serves investment and jewelry purposes. However, Schiff Gold finds it fascinating that “humanity’s newest and most advanced technology, AI, has looped around to depend on our oldest kind of money.”
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Why It’s Important: Schiff’s high expectations for gold from this industrial use case may be a little farfetched. An “Interesting Intelligence” story published in September 2020 said, citing estimates, that gold recovered from PCs and laptops ranged from $6 to $12.
Industrial video equipment has a higher proportion of gold, up to even 56 grams per machine.
As the Schiff Gold blog suggested, the quest for making high-performance GPUs may warrant the usage of more gold.
The AI boom is seen to last at least for about three to five years and currently, Nvidia is enjoying a near monopoly position in supplying AI accelerators. The demand for the chips is expected to grow exponentially and more players are expected to enter the fray. A gold rush by tech companies could drive more demand for the yellow metal.
Gold futures are up about 13% for the year-to-date period. They hit a record high of $2,448.80 (intraday) on April 12 before tapering a bit. Hopes that the U.S. Federal Reserve will cut interest rates from the 22-year high have primarily fueled the rally. A Fed rate cut would weaken the dollar and is in turn positive for gold, as the precious metal shares an inverse relation with the greenback.
At the same time, an inflationary economy will also be a positive for gold as investors may prefer to park their funds in safe havens.
The SPDR Gold Shares (NYSE:GLD) ended Tuesday’s session down 0.25% at $215.04, according to Benzinga Pro data.
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Posted In: GLD
