Gold – Bitcoin characteristics and more

Bitcoin remain the bell weather of the crypto world. We do not pretend to be experts on crypto currencies. The key characteristic of Bitcoin is the halving of payments to miners every four years. This means the number of Bitcoins outstanding cannot exceed a finite number (21 million). There are currently 19,969,375 Bitcoins outstanding with a further 1,030,625 Bitcoins left to be mined. 

We saw a fabulous chart the other day. A chart from Minex Consulting was used by Rupert Resources, a listed Australian company, in their most recent presentation material. The chart tracks annual Gold discoveries (in millions of ounces) against global exploration (in billions of Dollars) from 1975 to 2023. 

In 2005, 300 million ounces were discovered, a record high. Prior to that in the 1980 to 2005 period, discoveries averaged circa 150 million ounces per annum. Global exploitation expenditure has averaged circa $5bn pa over the past fifty years. It peaked in 2012 at $14bn but has since retreated to a range to $5-7.5bn annually. 

What interests us is the sharp decline in Gold discoveries since 2005. Discoveries halved between 2005 to 2010 to roughly 150 million ounces. They then halved again to circa 75 million ounces by 2015. Discoveries remained at that level during the period 2015 to 2020 but have fallen off a cliff since. 

You can buy things with Bitcoin but you cannot make anything with it. Thanks to its supreme conductivity, Gold continues to play a key role in the global electronics industry while the global jewellery industry is the other obvious significant consumer. Central Banks can be significant buyers or sellers (Thanks Gordon, we have not forgotten) but, equally (if not more importantly) those living in countries where currency depreciation has been an annual event for decades have a healthy respect for the metal’s ability to hold its value in real terms over time. 

India comes to mind. On this author’s first visit to India in 1989 16 Rupees would purchase 1 Dollar.  Today, 36 years later, one needs 86 Rupees to purchase 1 Dollar. Over five times as many Rupees. 

With its practical uses, as well as a proven ability to hold its value over time, Gold looks the better bet despite its recent run. Particularly if the halving continues.