I haven't posted on this platform for a while, more due to lack...

I haven't posted on this platform for a while, more due to lack of time than intent.

However, as was noted here by the previous poster, something quite interesting seems to be going on in the scarce and precious metals space of late, and as the current discussion happens to tie into some independent research that I have been preoccupied with, I feel the time is ripe to end my longstanding hotcopper hiatus.

Watching the recent dynamics that have been playing out in the gold and silver space, I have been formulating a theory, in line with some of the aforementioned research that I've been engaged in.

This research was prompted by a report from the IEA that caught my eye in recent weeks, the focus of which is levels of access to electricity around the world.

The International Energy Association periodically release these every few years, with the latest of these being released at the end of last year, with the data covering the period up to the end of 2022.

I try to keep an eye out for these releases, though they are easy to miss, with each release being years apart. The latest release, like the previous report in 2020, shows that electrification continues expand across the globe. So, nothing to see here?

Well, not quite. After subjecting these figures to close review, one pattern that grabbed my attention is that over recent years, the pace of electrification around the world has been accelerating.

Most notably, within the past five years, no less than four major Asian countries have achieved the major milestone of attaining of universal access to electricity, or at least have come very close to doing so.

The fact that the two largest of these countries, India and Indonesia, have now apparently achieved this goal didn't come as a surprise, as the topic has been broached by the media over recent years.

But I did find it surprising that two other major countries, Bangladesh and the Philippines, had both hit the 99%+ mark by the end of 2022, accordng to the IEA figures.

These are all major Asian countries, with a collective population of almost 2 billion.

Even the Philippines, the smallest of these, nearly matches Japan, which is currently the fourth-largest economy in the world, in the population stakes.

Why is this significant? I think this is probably best explained by means of a table, which I've based on the data from the IEA reports, as well as GDP per capita figures sourced from the IMF.

The table below shows nine Asian countries, the current per capita GDP, as well as the decade in which the electrification of the country was completed. You'll notice that a pattern becomes apparent.

Of these countries, China sits at the very bottom, as it was the first in line, with its rate of access to electricity climbing to the 99%+ level in the early years of the 2000s. Thailand and Malaysia hit the same milestone later that decade. Vietnam and Sri Lanka both crossed the line in the mid 2010s, and Indonesia did likewise at the end of that decade.

As mentioned above, the Philippines and Bangladesh have only very recently joined the electric club, which leaves us with India.

The Modi government claimed India had achieved 100% electrification back in 2018, but in truth, this assessment was probably overly optimistic. More plausibly, the country hit that mark within the past few years, which would be in line with the progress of its neighbour, Bangladesh, which is why I lumped India with the 2020s band of countries.

However, I'm getting distracted: the key point here is that four major countries, with a collective population of around 1,980 million, are now fully electrified. That hasn't happened before.

When China, which then had a population of around 1.3 billion, completed its electrifcation drive just over two decades ago, that was undoubtably consequential. What we have seen in the past few years is comparable, though on a still greater scale. The number of people around the globe gaining access to electricity of late is historically unprecedented, with consequences that are likely to be material and lasting.

As is evident in the table above,the GDP per capita of a country tends to soar after a nation attains universal access to electricity. Notice that the three countries that gained full access to electricity in the 2000s all have more than double the GDP per capita of the trio of newcomers.?

Now, I'll take a step back, and focus on why all of the above might prove to be consequential for precious metals.

Between the year 2000 and 2011, the gold price surged, rising from around US $275 per ounce in 2000 to over $1,800 in 2011, representing a more than six-fold increase in value.

If you are going to ask what was behind that spectacular rise, I think you could probably fairly sum it up in one word: 'China'.

There were probably a few China-specific factors helping to drive gold ever higher in the early years of this century: The Chinese government, for example, was actively encouraging its citizens to buy gold.

But of course, that wouldn't have been particularly effective if the populous didn't have any money to buy gold. In the event, they did.

The reason for this, is that in the early years of the 2000s, China's population crossed the 100% electricity access threshold, and in the wake of electrification, the GDP per capita of the population started to surge. As China's GDP per capita rose, so did the gold price, as the rising middle class of that country sought out assets to deploy and display their wealth.

Today, four Asian countries with a combined population of approximately two billion are at a comparable developmental stage to that of China about twenty years back.

If you consider the implications of this, the recent strength in the gold price might start to make more sense.

Now, it would be tempting to draw a simple conclusion from this. Maybe something like: 'We've seen this movie before- Buy gold!'

While that sentiment might sense on the face of it, I think some caution is warranted.

While I can't see how the macro backdrop described above wouldn't be positive for gold over the long run, there are some key differences between the early 2000s and today that have to be borne in mind.

The most significant of these simply relates to the price.

In the year 2000, on the eve of the China boom, gold was an unloved commodity. Anyone who had bought a lump of the stuff ten years earlier would be harbouring a loss, and if you'd bought it twenty years earlier you'd be sitting on a significant loss.

That isn't true today. Whether you bought gold ten years ago, or twenty years ago, you'd be sitting on some handsome profits. The gold price today is eight times higher than it was in the year 2000.

So, in my view, gold just doesn't appear to be underappreciated today, as was certainly the case at the dawn of the century.

In light of this, I think gold could be at risk of a correction, or perhaps even some kind of 'flash crash' at some stage in the near future. Given the current price, you have to assume that it would be very attractive to mine gold at the moment, and at time of writing, there would not appear to be any shortage of companies itching to do so, judging by the multitude of locally listed gold stocks.

So, if not gold, than what? No prizes for guessing the answer to that one.

While gold has been in the headlines of late, I suspect the canny cats are paying more attention to silver.

Whereas gold has risen around eight-fold in the past twenty-four years, silver is up only five-times. It certainly has the look of a commodity that has been left in the dust.

However, if we assume that India's economic growth will mirror the pattern that unfolded in China some twenty years ago, this might also have interesting implications for silver.

It is hard to conclusively prove this, but there is reason to suspect that silver might hold more cultural traction in India than it does in China.

So if the per capita income of India was to surge in the years ahead, would that mean more Indians would gravitate towards silver, rather than gold? It is hard to determine, but it is a distinct possibility.

Finally, as has been highlighted here previously, there is good reason to believe that silver is also more supply-constrained than gold, and probably much more so.

I think it is illustrative to compare the number of ASX listed gold explorers to their silver focused peers. There are too many gold explorers to name. But not so with silver. I think I'd capture most of them is a line or two: Silvermines, Investigator, Argent Minerals, Manuka, Boab. Maybe Austral, if you are being generous.

Thomson are currently walking a high-wire, and it could go either way. White Rock have already fallen by the wayside, with their assets having recently been picked up by Legacy. I'm sure there are a few silver companies I've missed, but probably not too many others.

In closing, I think it is plausible that the 'electric growth' of those four Asian nations might be starting to stir the precious metals pot. As incomes rise in these countries, you'd expect that the populations of these countries would steadily start to accumulate more gold and silver.

All the above would suggest that there could be considerable upside for gold, and given the challenged supply situation, perhaps even more so for silver, over the years ahead.