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Will Technology Spur Gold Demand?

Commodities / Gold and Silver 2017 Dec 08, 2017 - 04:11 PM GMT

By: Arkadiusz_Sieron

Commodities

This week, the WGC released a market update entitled “Technology – a brighter outlook?”. What are the main conclusions of the report?

On Tuesday, the World Gold Council published its latest report about the technology sector’s demand for the yellow metal. The main point is that we see a rebound in gold’s use in electronics. As it is commonly known, gold’s physical properties (such as high electrical conductivity) make it an excellent metal for wide use in electronics. But due to high prices and the advancing substitution in the electronics sector, the volume of gold used in technology has decreased in recent years.


However, the demand from electronics has been growing since the last quarter of 2016. The WGC noted that the technology demand grew in Q3 2017 for the first time since 2010. This is why the organization believes that the major fall in demand for gold in the electronics sector may be behind us, and that the outlook is brighter. The main reason is the rising electrification of the world (think about the Internet of Things or the electric car revolution we analyzed in August edition of the Market Overview) with the ever-increasing demand for memory chips, and a new generation of smartphones. And gold’s application in solar energy technologies is growing as well. Last but not least, nanoparticles of gold may also be used in catalytic convertors in vehicles instead of palladium or platinum.

What does it all means for the price of gold? Well, not much, actually. As we continuously repeated, gold as an investment should not be analyzed like a commodity, but as a currency or monetary asset, as the yellow metal is not consumed like other commodities. It means that it does not derive its economic value from being used as an input in the industrial production. Hence, technology barely affects the price of gold. Even according to the WGC data, which we see as inaccurate, the technology demand for gold accounts only for about 17.6 percent of the total demand. Will a 2-percent increase in technology demand (in Q3 2017, y-o-y) drive gold prices? We dare to doubt.

Summing up, the WGC released this week a new market update. It was interesting to read about changes in gold’s use in technology, but investors should not count on them when trading bullion. There are better gold investment ideas than betting on the technological breakthrough boosting the demand for the yellow metal.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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