Creating gold

Those who adhere to the Gold Standard, nicknamed gold bugs, do so because the quantity of gold cannot be manipulated by politicians. Unlike fiat money that comes off the printing presses, real and metaphorical, gold is beyond the control of politicians. They cannot increase the supply of it before an election to create a false boom that might win them votes.

 Critics of the Gold Standard prefer a currency that can increase in supply by roughly the 1½-2% a year that the UK has averaged in growth for over 150 years. Gold cannot do this.

 All the gold ever mined in history could fit into a cube with sides of approximately 22 to 23 metres, a volume significantly smaller than a third of the Washington Monument's height and much less than the volume of that third.

 Henry IV of England was concerned that alchemists might create gold from base metals, thereby devaluing the worth of his own gold and destabilizing the nation’s finances. So, on January 13th 1404, Parliament passed a statute called the Act Against Multipliers, making alchemy, or more specifically, the multiplication of gold and silver via alchemy, a felony.

No-one was able to achieve this, but it was banned anyway. It was not until 1689 that the ban was lifted at the behest of Robert Boyle, the distinguished father of modern chemistry, who nonetheless practised alchemy on the side, albeit unsuccessfully.

The debate was between fiat currency making Zimbabwe and Venezuela possible, versus gold giving stability, but risking deflation and maybe limiting growth. But now there’s a new kid on the block. This week a start-up called Marathon, which has made breakthroughs in fusion power generation has announced that it can produce gold by bombarding mercury with the neutrons produced during fusion.

A type of mercury named mercury-198 could be added during fusion reactions, causing it to be bombarded with neutrons and turning it into a different form, mercury-197. This form of mercury is unstable and would decay over about three days into the only stable and naturally occurring form of gold, known as gold-197. The company has estimated that a fusion plant producing one gigawatt of energy per year could create about five tonnes of gold each year without reducing its power output.

Five tonnes per gigawatt without loss of power sounds small. But 1000 gigawatts giving 5,000 tonnes of new gold entering the markets is more significant. It’s a good job there’s so much space in the Washington Monument, but what will it do to the value of existing gold stocks?

Madsen Pirie