Lithium vs. Gold

A recent telephone survey by Global Metal News showed millennials know more about lithium than gold.

And that makes a lot of sense.

They know lithium is used to power all of the cell phones, laptops, and tablets they use on a daily basis. They know lithium is a key component in the electric vehicle revolution. They’ve probably heard something about Elon Musk’s $5 billion Gigafactory. And they might know that lithium is sometimes used as a medicine.

But what do they know about gold?

Well, they know gold is used for jewelry. And they know it’s used to make coins and bars.

But that’s about it.

So how did the world’s most precious metal become secondary to one that was isolated by scientists less than 200 years ago?

I can only speculate. However, I would guess that most millennials simply see lithium as a more useful material than gold. And to some extent, they’re right.

As mentioned, lithium is a key component in the multitude of technologies that millennials are very familiar with and use on a daily basis. The large majority of gold, on the other hand, is used for jewelry and investment. Less than 10% of the world’s gold goes into technologies and industrial applications.

But that doesn’t mean gold isn’t useful. The fact is, gold could be incredibly useful.

• Great conductivity and resistance to oxidation and corrosion make gold a great metal for electrical connectors.
• Gold’s catalytic properties can be effective in reducing hazardous emissions to the air and removing industrial pollutants from groundwater.
• Exceptionally malleable and ductile, gold can be manufactured so thin that it appears transparent and can be used as a reflector of electromagnetic radiation, radio waves, and heat.
• The metal’s biocompatibility makes it a natural choice for sensitive human implants.
• Gold-based drugs have been developed and are used to treat illnesses. Research is currently ongoing into the role that gold nanoparticles can play in cancer treatment.

This list can go on and on.

The reason less than 10% of gold supply goes into technology and industrial applications is simple…

Gold is too valuable.

Now, of course, there are other metals such as platinum that are priced just as high as gold in U.S. dollars, yet are still widely used in industrial applications. But gold has an esoteric appeal to human beings that is difficult to exactly identify.

We must assume that the first human being to ever encounter gold did not think of the metal as a monetary object. In fact, the first human being to encounter gold likely had no frame of reference for money at all. Most likely, gold was first identified as a curiosity.

As time passed, however, gold became the natural option for human beings to store their labor, as the metal is very easy to identify, does not corrode, and is available enough (but not too available) to be used as money and associated with wealth.

Later, gold became associated with illumination and wisdom and used to express veneration of the divine or a divinity. Gold is still used as symbolism in every religion in the world today.

Distilled, gold is a form of communication between human beings. Aside from its price, gold’s value is as a part of the universal language. You can show gold to anyone anywhere in the world, and they will be able to immediately connect it to either wealth or wisdom.

And so gold is never discarded. It’s always recycled. In fact, some estimates suggest that 95% of all the gold ever mined is still in use today. The same cannot be said about lithium.

The International Solid Waste Management Association says:

The average lithium cost associated with Li-ion battery production is less than 3% of the production cost. Intrinsic value for the Li-ion recycling business currently comes from the valuable metals such as cobalt and nickel that are more highly priced than lithium.

Now, it might seem that I don’t like lithium as an investment. But that’s not the case at all. In fact, I love lithium as an investment.

Sandler Research reported last year that the global lithium market is estimated to grow at 11.12% CAGR between 2015 and 2019. And being as the oldest millennials today are approaching the age at which people begin to seriously invest their money, lithium looks like an incredible investment opportunity for years to come.

My colleague and fellow Energy and Capital editor, Keith Kohl, just pointed me to a lithium stock I’m going to be adding to my personal portfolio. So I am a lithium investor myself.

Nevertheless, I recognize that gold has something lithium never will…

Both gold and lithium potentially have a multitude of different applications. But gold is engrained in human association as a store of wealth and money. And it’s extremely unlikely that lithium will replace (or even compete with) gold in this way.

As I’ve said many times before, I am absolutely not interested in owning gold forever. I don’t want to marry gold. I just want to date it for a while. And at the same time, I want to date lithium.

Fortunately, I don’t have to choose one or the other when it comes to investing. I can (and do) invest in both gold and lithium. And I think you should, too.

Luke Burgess
Energy and Capital