How Important is AI for Gold Demand?

Overview

• Gold Demand in Electronics:

  • Peaked at 328 tonnes in 2010, declining to 249 tonnes by 2023.

  • Modest recovery in recent quarters, partly driven by Artificial Intelligence (AI).

  • AI’s role in gold demand is a growing area of interest.

Gold in Electronics: A Recent History

• Key Properties of Gold:

  • Exceptional electrical conductivity.

  • Resistance to corrosion.

  • Malleability for thin wires and coatings.

• Role in Electronics:

  • Crucial for computer chips and electronic devices.

    

• Impact of Rising Gold Prices (2001-2011):

  • Prices surged from ~$250/oz to over $1,800/oz.

  • Led to:

    • Substitution: Use of alternatives like silver and copper.

    • Thrifting: Reduction in gold usage per unit.

  • Implementation of these measures took years due to the complexity of retooling and process development.

• Balancing Costs and Demand:

  • Manufacturers reduced gold usage while meeting the demand for powerful, durable devices.

  • High-end components became essential during the “electrification” boom (smartphones, laptops, EVs, etc.).

The Role of Gold in AI

• AI’s Growing Influence:

  • Driving advancements across industries.

     

  • Increasing demand for advanced hardware, including

    

    processors, memory chips, and sensors.

• Gold’s Contribution to AI Devices:

  • Ensures:

    • High-speed data processing.

    • Minimal energy loss.

    • Longevity and durability of components.

  • Integral to AI-powered devices (e.g., smartphones, autonomous vehicles) and data centres.

• Future Trends:

  • As AI evolves, hardware demands will grow.

  • Sectors like healthcare and finance adopting AI will amplify gold demand.

Challenges and Innovations

• Cost Pressures:

  • Gold prices recently exceeded $2,700/oz.

  • Manufacturers face challenges similar to 2010:

    • Limited room for further thrifting or substitution.

    • Technologies pushing the limits of gold usage.

  • Emerging Technologies:

    • Example: Gold-free mini-LEDs replacing traditional gold-based LEDs.

Beyond AI: Gold in Other Sectors

• Medical Devices:

  • Used in implants for biocompatibility and bacterial resistance.

  • Critical in diagnostics and drug delivery.

• Aerospace:

  • Protects satellites and spacecraft from radiation and heat.

  • Withstands extreme conditions.

• Clean Technologies:

  • Catalyst in hydrogen production and CO₂ transformation.

Investment Opportunities in Gold and AI

• Gold and Gold Mining Investments:

  • Royal Gold, Inc.:

    • Leading precious metals streaming and royalty company.

    • Portfolio includes numerous producing, development, and exploration-stage properties.

  • Harmony Gold Mining Company Limited:

    • Operates in South Africa, Australia, and Papua New Guinea.

    • Demonstrated significant stock growth.

  • Alamos Gold Inc.:

    • Notable growth with a 195% increase over five years.

• AI Chip Manufacturers Investments:

  • Intel Capital:

    • Investment arm of Intel Corporation.

    • Active in AI-related companies, including SambaNova Systems and AI21 Labs.

  • SK Hynix:

    • South Korean memory chip leader.

    • Partnered with Nvidia in the AI chip sector, boosting its stock performance.

Conclusion

• Gold in Electronics:

  • AI-driven applications will bolster gold demand.

  • Manufacturers will innovate to balance cost and utility.

• Broader Applications:

  • Gold’s unique properties ensure its relevance across industries.

  • Its role in medical, aerospace, and clean technologies highlights its versatility and enduring value.

• Investment Insights:

  • Companies investing in gold and AI demonstrate the strategic importance of these sectors in driving technological and financial growth.