AI's Gold Thirst Can Make The Yellow Metal Costlier For You

Let's be real, AI is taking over everything. Right from customer service, to making the image you clicked to read this story. Enter gold — While we, human kind, need the yellow metal for bling and the new-age tech needs it for brains.

Commodity experts see demand from AI hardware manufacturing bringing significant demand for gold in the future, exerting more pressure on the already elevated rates of the precious metal.

AI systems have always relied heavily on advanced hardware, including processors, memory chips and sensors — all of which need gold. AI-enabled devices, such as smartphones and autonomous vehicles, alongside data centres, have created a rise in the need for highly efficient and reliable metal in electronic components.

Gold's conductivity ensures that data can be processed and transmitted at high speed with minimal loss. Further, gold's resistance to corrosion ensures component longevity and durability, which is crucial for continuous and intensive AI applications, according to the World Gold Council.

"Demand is coming in from technology and manufacturing... As AI gets more popular, the demand from this sector is set to increase with the usage of electronic chips. Gold is a great metal in this sense as it's a great conductor. It’s the sheer nature of gold that's driving this," said Sachin Jain, regional chief executive officer at the Indian arm of the World Gold Council.

As the demand for AI increases, the scale of gold's usage in this sector is set to rise further. In the first quarter of 2024, the electronics sector's usage of gold reached 64.4 tonnes, marking a 13% year-on-year increase, according to the World Gold Council. This was largely driven by the expansion of AI-related technologies.

For 2023, total gold consumption in electronics was approximately 249 tonnes, with notable recovery in the final quarter attributed to AI and consumer electronics growth.

As AI adoption accelerates in data centres, graphics processing units, and AI-enabled devices like smartphones and autonomous vehicles, the demand for gold in electronics is projected to exceed 260 to 270 tonnes annually by 2025. AI's growing influence in data centres and GPUs is a key factor in this upward trend, according to Kedia Commodity Comtrade Pvt.

As AI infrastructure expands globally, gold consumption in this sector is expected to sustain or even surpass current levels.

Pushed by the AI industry, the industrial gold demand is likely to move further, according to Vandana Bharti, research head for commodity at SMC Group.

"Demand for gold in electronics peaked in 2010 at around 328 tonnes. Now, it is at 250 tonnes in 2023, but AI can help to raise the demand by up to 4-5%," Bharti said.