Gold and technology: Is yellow metal precious for tech sector too? Its demand in tech and AI explained

Gold is a precious metal for many reasons—for starters, it is one of the most durable metals that maintains its value over time as it does not tarnish, rust or corrode. The metal’s malleability allows it to be transformed into jewellery, coins and so much more, and its cultural significance in India including in weddings and religious ceremonies, makes it appealing in domestic and international markets both.

To top it all off, gold is a safe haven, a hedge against inflation, market volatility, global uncertainty and geopolitical tensions. It offers a stellar risk premium, which is the value investors expect to be added to the metal due to the aforementioned factors.

Now, gold's role in technology and artificial intelligence is making quite some noise.

Gold and technology

Transformed applications of gold in tech

The use of gold in technology has evolved in the past 150 years. Many of its modern applications emerged in the 20th and 21st centuries as technological advancements allowed for new and revolutionary uses.

Today, gold is used in several modern technologies including artificial intelligence (AI). Gold’s conductivity, corrosion resistance, and ability to form reliable, thin wires make it a suitable fit for AI-enabled devices.

Reports have suggested that the demand for AI and modern technology is bound to increase in the near future. The yellow metal’s exceptional conductivity makes it a reliable option for producing data processors that are both sustainable and cost-effective.

Moreover, recent World Gold Council (WGC) data has shown that gold’s resistance properties and other physical and chemical characteristics make it indispensable in the technology sector.

WGC’s Gold Demand Trends 2024

Gold continues to play a crucial role in the rapidly evolving technology sector, marking a substantial surge in demand as industries like electronics and AI drive growth. According to the Gold Demand Trends Q1 2024 report by WGC, gold demand driven by technology in the first quarter of 2024 rose by 10% year-over-year (YoY), reaching a total of 78.6 tonnes. A key contributor to this growth was the strong recovery in the electronics sector, which saw a remarkable 13% YoY increase in gold usage, climbing to 64.4 tonnes.

The rise of artificial intelligence (AI) has been one of the primary drivers of this growth. As AI applications are gradually increasing across the consumer electronics, automotive and communications industries, the demand for gold is continuously increasing. The rise in demand is exceptionally notable in high-performance components used in these electronic gadgets.

A primary area of focus in the electronics sector is the surge in demand for smartphones, cloud computing infrastructure and wireless technology.

The electronics sector’s recovery, which began towards the end of 2023, has continued into 2024, especially in East Asian markets, the WGC report noted. Countries like Japan, South Korea and China recorded significant YoY increases in gold demand in the electronics sector during Q1 2024. Japan led with a 24% increase, followed by South Korea at 20.2% and China at 18.5%. Apart from supply chain restocking, this growth was majorly driven by the new AI-driven consumer electronics.

Furthermore, the increased demand for Light Emitting Diodes (LEDs) has been another contributor to the gold demand. Automotive industries and big events like the upcoming Paris Olympics 2024 drove the demand for high-quality displays and backlighting, which often make use of gold for improved performance and durability.

Future outlook for gold

Gold demand in the technology sector saw a 7% YoY increase from Q3 2023 to Q3 2024, with electronics rising by 9%.

As the year 2025 approaches, gold demand in technology is expected to maintain its upward trajectory. Experts suggest that the growth of AI, along with the growing electronics sector, will continue to fuel demand for gold. The role of yellow metal as a critical production material in technology manufacturing is evident, the WGC report showed.

Gold prices 2024

The current year has been an interesting ride for gold prices. The yellow metal, this year, touched its all-time high of ₹80,000 per 10 gm 24K gold during Diwali. This marked a 30% increase in prices since the Diwali festival 2023. The rising geopolitical tensions and market volatility kept gold on an upward trend for most parts of the year. However, it noted a 2.6% overall decline in the month of November, coming down from the festive highs.

Gold has again been on a steady increase with Russia-Ukraine escalations and the wedding season in India. The technology-driven demand for gold has just made the metal more appealing to investors, and this AI boom for gold is expected to be even stronger in the upcoming year.