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A New Play for Gold Investors

Written By Geoffrey Pike

Posted February 3, 2016

ecogoldThere may be new developments in the gold mining industry that could yield significant amounts of gold. The best part is that it will be relatively cheap and environmentally friendly.

There is a catch to this. The gold mining wouldn’t come from the ground but from gold that was already mined from the ground. It is gold that is found in electronic waste.

According to NDTV, a news channel in India, scientists have discovered a new approach in extracting gold from electronic scraps such as computer chips. While we don’t know if this will work on a large scale, it could be revolutionary in obtaining gold that was previously left for garbage.

According to Stephen Foley of the University of Saskatchewan in Canada, gold can be extracted from circuits in about 10 seconds while leaving the other metals in place.

Foley says that a new solution used to extract the gold costs only 50 cents per liter and can be recycled for use again. The new solution only requires 100 liters to obtain on kilogram of gold.

This compares to the 5,000 liters currently used to extract one kilogram of gold, which is a mix of nitric acid and hydrochloric acid and can’t be recycled.

In other words, this new solution will make it far cheaper to get the gold out of old electronics, while supposedly being much more environmentally friendly. This could be profitable for the creators of this solution, especially if it works on a larger scale.

But just as with modern technology and global communication, we should expect this process to be replicated and to spread quickly if it really is as great as it sounds.

So what are the benefits and drawbacks if this new solution is revolutionary in the gold mining business?

More Gold, More Wealth

If it all of a sudden becomes profitable to extract gold hidden away in computer circuits, then we should expect some people to make out well with it. There will be businesses set up or expanded specifically to collect old electronic equipment that contains gold, even if the amounts are not big.

It is certainly a less risky business than going into some foreign land and spending millions of dollars to dig holes in the ground in the hopes of finding something.

It is hard to say how much gold there is above the ground that is basically thought of as garbage at this point. There is also a question of how much effort it is worth to find it.

If this new extraction process does yield new gold supplies – which will really just be recycled gold supplies – then it could ultimately impact the price, if the supplies are big enough.

Still, there are a lot of “ifs” and hypotheticals here, so I wouldn’t recommend changing your investment strategy or your gold allocation based on these reports.

Gold investors tend to think negatively about new gold supplies becoming available, whether it is through mining or something like this extraction process. It is understandable, because new supplies would tend to drive prices down.

Overall, we should not fear these new supplies. Gold is wealth, so more wealth is ultimately good for society. Of course gold is used for jewelry and has a history of being used as money and a store of value. But gold does have its industrial uses, such as we see here in electronics.

Also, this world now has over 7 billion people, most of whom don’t own any significant amounts of gold. Even if gold supplies do increase more than expected, it wouldn’t take much of an increase in demand to quickly offset this increase or any significant increase in mining activity.

As central banks around the world continue to attempt to solve their economic problems of low growth and high debt by creating even more money out of thin air, I think we can safely ignore any reports about new gold supplies becoming available. There is no way the new gold supplies can compete with the new supplies of fiat currencies. This will ultimately mean higher prices for gold.

When central banks create money, it increases debt and misallocates resources. When new gold is found (or recycled), this creates more wealth. I will trust that the gold supplies will grow at a slower rate over any fiat currencies, despite what some scientists may be doing to obtain more gold.