News of the discovery of approximately 40 million troy ounces of gold in Russia’s Siberian region is likely to boost the profitability of the country’s biggest gold producer, while adding to the supply of the “scarce” resource. Reports say the Polyus owned the Sukhoi Log contains 540 million tonnes of ore, which translates to an average of 2.3 grams per ton. The reserves, which will account for a quarter of Russia’s gold stocks, are likely to generate $76 billion in revenues for Polyus when using current prices.
How Bitcoin Compares to Gold
Although the Sukhoi Log announcement adds to the proven reserves and stocks of gold, it is unclear how this will affect the metal’s price in the immediate to short term. However, gold which has traditionally been used as a hedge against inflation is likely to grow in value as the money supply increases. The precious metal behavior contrasts with that of bitcoin, an asset that appears to exhibit an inverse relationship between its circulating supply (or stock) and its price.
With about 18.5 million coins–out of the total fixed supply of 21 million–already mined and circulating, institutional investors hold nearly 4% of that, according to bitcointreasuries.org. However, as more institutional investors join the bandwagon of corporations buying bitcoin, the resulting supply shrinkage will help the price of the digital asset to surge even further.
To illustrate, right before Square Inc acquired 4,709 bitcoins for about $50 million, the digital asset was trading at around $10,500. However, between Square’s bitcoin purchase and the period following Paypal’s big announcement on October 22, the value of the coin surged to a fresh high of $13,300. At the time of writing, bitcoin is oscillating around $13,000. For Square Inc, this means in less than one month, its bitcoin reserves have grown in value from $50 million to more than $61 million. Grayscale and Microstrategy, which have also…