Not just central banks need gold
Over the past year, all analysts' attention has been focused on the historically large purchases of gold by the world's central banks. Why is this? The main reason for so much attention is that this gold is being bought and accumulated. That is, it is almost never returned to the market in the form of supply.
However, central bank purchases account for only about 20% of annual gold demand. The jewellery industry is the biggest buyer of gold, accounting for almost 50% of annual demand for the yellow metal. The investment sector accounts for a further 23%.
Only 6% of gold demand comes from the industrial sector (excluding jewellery, of course). Demand from the technology sector is marginal, but can we see growth in this sector? Let's take a look together.
Silver and copper are the best conductors of electricity, but gold is more resistant to corrosion and oxidation. This is why it is widely used as a coating in electronics, especially where long-term stability is important. It is used to coat connectors, switches and relay contacts, circuit boards, microprocessors and memory chips. Because of this durability, it is also used in the aerospace industry, where it is used to coat components of satellites and spacecraft.
In the latter, it can reflect infrared radiation and protect spacecraft from overheating, which is essential in the vast temperature fluctuations of space. Gold is also used in heat shields that protect sensitive equipment from high temperatures when it enters the Earth's atmosphere. The tether that binds the astronaut to the spacecraft is gold plated. The visors of astronauts' helmets are gold-plated to protect their eyes from harmful ultraviolet radiation.
Ultimately, the durability of gold is the main reason for its use. When you send a spacecraft into space, you need durable materials - you can't repair it. The use of space is not yet significant enough to affect the demand for gold, but this could change dramatically as space exploration increases.
Because of its reflective properties and stability, gold is used in optics: in lenses and mirrors, especially in space telescopes to reflect infrared light. The mirrors of the famous James Webb Telescope, the largest optical telescope in space, are coated with gold to optimise the mirrors' performance so that they can image objects that are too old, too far away or too faint for the Hubble Space Telescope.
Gold is increasingly being used in nanotechnology. Gold nanoparticles are used in photonics (the science of light waves), particularly in the development of light-based technologies for imaging and sensing. The inert nature of gold makes it an excellent material for nanoparticles used as catalysts in various chemical reactions. For example, gold nanoparticles are used to oxidise carbon monoxide in air purification systems.
The list goes on and on. The most important thing to recognise is that there is strong diversification. Investors try to diversify their assets as much as possible. Similarly, gold itself has a huge number of uses. Plus the investment component.
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