The Alchemist’s dream is realised: scientists create gold from base metals, but gold investors shouldn’t worry

Pineapples used to be the ultimate symbol of wealth.

Between the 16th and 18th centuries only the extremely rich and powerful could afford to eat pineapples. Each one cost the equivalent of around £5,000 in today’s money.

They became such a symbol of prestige that many monarchs and influential people of the day had portraits with pineapples in the foreground or background.

St Paul’s Cathedral was built in 1675, primetime for the pineapple. And as such, it features golden pineapple sculptures on each of its towers, as you can see below.

Source: Wikimedia

The reason pineapples were so prestigious and valuable was because of their scarcity.

Pineapples were first brought back to Europe by none other than Christopher Columbus himself in 1493. And because pineapples could only grow in tropical climates, all efforts to cultivate them on his return failed.

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Despite sinking vast sums of money into the problem, European royalty, who positively adored the fruit for its natural sweetness (sugar and sugary items being in short supply), for centuries after its “discovery” the only real way to obtain a pineapple was to pay to have one directly imported, which was no cheap affair.

Many transport ships of the age were too slow and conditions too hot aboard the vessels to keep whole pineapples from rotting during the journey. So to get a whole pineapple fruit safely from the plant to one’s table in Europe took the fastest ships and most favorable weather conditions. 

As a result, virtually the only people who could afford to purchase a whole pineapple, let alone eat one while it was perfectly ripe, were royalty or the ridiculously wealthy.

Eventually Dutch botanists devised ways to grow pineapples in “hot houses” and in the later 1700s they brought their secrets over the England.

But this method of cultivation was extremely expensive, and only very rich families could afford to grow their own pineapples.

All this changed in the late 1800s as trade ships’ speed improved under steam power and pineapples were cultivated in Hawaii.

Then in 1903, James Drummond Dole took the pineapple mainstream. He started a big plantation in Hawaii and began canning his pineapple crop and shipping them worldwide.

By 1923 canned pineapple were a common sight all over the world and the pineapple’s prestige was gone.

Today, you can buy a pineapple for less than the price of a cup of tea. Most people will never know the reverence pineapples once commanded.

Could gold really go the way of the pineapple?

The story of the pineapple gives us a great insight into human nature and the way we ascribe value.

It should serve as important lesson to all investors.

It shows that scarcity and prestige are key drivers in how we assess what things are worth.

And for most of human history there have been very few things that are rarer or more prestigious than gold.

Gold has maintained its value for millennia. Why? Because, just like the pineapple in the 1600s, it was hard to obtain.

For centuries “alchemists” tied to devise ways to create gold form common metals like lead. If they had succeeded, gold would not have the same value it has today.

It would have gone the way of the pineapple. There would be no gold investment industry, and it certainly wouldn’t have the roughly $7 trillion market cap it does today.

Of course, alchemy is impossible, though. Right? You can’t just turn a base metal into gold with a few potions and powders. So there’s nothing to worry about.

Well, it turns out that back in the 1980s, the alchemists succeeded.

In a well-documented experiment, two of them managed to turn the base metal bismuth into gold.

So why didn’t the gold price plummet? Why is it still currently trading for $1,333 an ounce?

In March 1980 a Nobel-prize winning chemist realised the alchemists’ dream, creating gold from a common base metal

The reason ancient alchemists could not turn base metals into gold, no matter how hard they tried, was because lead and gold – as every high-school chemistry student now knows – are different atomic elements.

Back in the alchemists’ heyday, there was no periodic table and no understanding of how elements are structured.

The alchemists believed lead and gold to be hybrid compounds, which would be amenable to chemical change.

Today, we know better. No “philosopher’s” stone is going to turn lead into gold. But a particle accelerator can.

As Scientific American writes:

What of the fabled transmutation of lead to gold? It is indeed possible—all you need is a particle accelerator, a vast supply of energy and an extremely low expectation of how much gold you will end up with. More than 30 years ago nuclear scientists at the Lawrence Berkeley National Laboratory (LBNL) in California succeeded in producing very small amounts of gold from bismuth, a metallic element adjacent to lead on the periodic table. The same process would work for lead, but isolating the gold at the end of the reaction would prove much more difficult.

““It is relatively straightforward to convert lead, bismuth or mercury into gold,” said David Morrissey, one of the experiment’s scientists.  “The problem is the rate of production is very, very small and the energy, money, etcetera expended will always far exceed the output of gold atoms.”

Just how much would it cost?

According to one of the experiment’s lead scientists, Glenn Seaborg, who had previously won the Nobel-Prize for his work in Chemistry, it would have cost “more than one quadrillion dollars per ounce to produce gold by this experiment.”

So although alchemy is possible, it certainly isn’t cheap. In fact it is orders of magnitude more expensive than simply pulling gold out of the ground. At least it was back in 1980.

However, as technology inevitably improves, if particle accelerators ever become accessible gold’s prices could tumble.

But the likelihood of that happening in our lifetimes is negligible.

Still, it’s an interesting thought.

What is far more likely to happen, as we’ve been seeing over the past few weeks, is that the gold price will increase.

Why? Well, as I said earlier this week, gold tends to go up as political and economic uncertainty increases.

And right now, it’s fair to say, we are going through a great deal of political and economic uncertainly.

Which is one of the reasons why Eoin Treacy’s gold investor’s master plan has been proving do popular with our readers.

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It shows you how to buy, store, and invest in gold… and which specific gold investments Eoin believes could turn a £100 into £1,000.

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Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Commodities

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