The Biggest Gold Discovery in History?

So this happened… 

The African nation of Uganda announced last month that multiple geological surveys have discovered 31 million metric tons of gold ore, which after refinement would theoretically yield about 320,000 tons of pure gold. 

The total above-ground gold that exists in the world today—gold production that spans the history of humanity—is about 200,000 tons. 

In short: Uganda claims it has found the mother of mother lodes, a cache of gold that would increase world gold supplies by 2.6x. 

That’s a lot of gold. 

And it would clearly have an impact on gold prices. It would imply that gold is not nearly as rare as we assume it to be, so gold prices would reflexively decline…probably by more than half since we’re talking about a supply increase that more than doubles the world’s current horde. 

Of course, not all of this Ugandan gold would land on the market in one fell swoop. It would take decades of mine construction and physical mining before that gold hit the market.  

And it assumes that Uganda really does have 31 million metric tons beneath its borders, and that might or might not be true. Who knows? 

But this much is true: If Uganda has indeed found such a massive quantity of gold, and if indeed Uganda begins producing and dumping large quantities of gold onto the market (it recently hired a Chinese firm to do the mining), then that raises a big question, the primary question in today’s dispatch: Where does the world turn to for a global reserve asset? 

Right now, gold serves that function. Central banks around the world have mountains of gold buried away to stabilize their economies in case of economic disaster. 

But if the world is flooded with gold, they’ll need something else… 

Can’t be the U.S. dollar. That thing is about as rare as dirt in a garden these days. Won’t be the euro—too much angst about its long-term survival, given the challenges of its multi-country structure. Won’t be the Chinese yuan—too much angst about the government behind that currency. 

After those three, there are no more currencies large enough to manage a global economy. 

That leaves us with two choices: A basket of currencies or…bitcoin. 

Don’t stop reading. 

The “basket of currencies” approach has its proponents (and I will tell you in tomorrow’s column about a basket of currencies that is rising up to challenge the greenback). But every last currency on the planet is manipulated to various government ends. None of them are truly “reserve asset” worthy. Not even the dollar, which no longer resembles the dollar of yesteryear when it was charged with managing the world economy in 1944. 

Today, our dollar is a morbidly obese currency dying from excessive debt…thanks to repeated overspending by politicians who have the willpower of toddlers left alone with a plate of cookies.  

Literally the only currency in the world that is not beholden to anyone is bitcoin. 

Certainly, bitcoin has it challenges, namely its insane volatility. But that’s a function of youthfulness and narrow global ownership.  

Bitcoin has only been around since 2009. And it’s only since 2017 that people began paying attention to it as anything other than a novelty.  

As of last year, the best estimate was that 106 million people around the world own at least some exposure to bitcoin. Seems like a lot of people. But it’s just 1.3% of the global population.  

Moreover, I’d argue based on what I see in my own crypto journey that even today most of those people are young and aren’t buying bitcoin as an asset but rather as a fast-flip lottery ticket. 

Once the currency is more widely distributed, volatility is going to flatten. 

More importantly, once Western debt causes a crisis (and it assuredly will) governments are going to need to peg their currencies to something to stop the freefall.  

Could be gold. But if Uganda is mining 2x the world supply, gold’s price would be weakening too. 

The only easily tradeable asset that has zero built-in inflation is bitcoin. 

I know it sounds preposterous. But that’s only because the world is accustomed to the normalcy of the last many decades. That normalcy, however, is shattering. Too much debt will do that, as the world is about to find out. 

I’d still own gold for sure, and I’d still own gold miners. I’m not letting some Ugandan claim deter me. I will say that this is also a reason I prefer rare gold coins over bullion. They will always have numismatic value because of their historical relevance. 

But I also own bitcoin, and I will be adding to my stash because I don’t see any other candidate that can step in as a financial anchor when Western currencies—most particularly the dollar—finally face their debt reckoning.  

That day is not far off.