Voima Weekly #17 – Structural Premium

Photo made with AI.

In the final part of a Weekly letter #14, I wrote that gold could develop a “structural premium.” I received the following question:

“You wrote in your Weekly that investors are paying fifty times Nvidia’s earnings. Then you concluded: ‘Gold may gain a similar premium – not speculative, but structural.’ What exactly did you mean by that?”

A premium most often simply means an extra price: investors pay a premium when they expect to receive something special in return. But there are different kinds of premiums. Let’s go through the difference between a speculative premium and a structural premium.

A speculative premium arises when the market gets excited. When the story carries more weight than reality. When money flows in the same direction and the fear of missing out drives people more than reason. It is a quick, contagious, and often self-reinforcing phenomenon – as seen in the IT bubble of the early 2000s. At that time, technology stocks simply had to be bought, at any price.² The speculative premium lives on expectation: “If I buy today, someone will pay me more tomorrow.” It is a short-term phenomenon, and its ending is always the same – at some point, expectations collide with reality. Such premiums can appear in both long and short cycles, but their nature is always the same: they live on stories, not on structure.

A structural premium does not arise from expectation but from need. It emerges when an asset begins to fill a role in the economic system that nothing else can fill. The dollar retained its structural premium even after it was detached from gold. If you wanted to trade oil efficiently, you had to have dollars – and that ensured a permanent demand for the currency. The demand was not based on belief, but on structure: oil pricing, payment systems, and debt instruments were all tied to the dollar.

Nvidia’s premium stands between two worlds. It is speculative in how highly the market is willing to price the future – but structural in the sense that almost the entire digital economy relies on its chips. It is an entirely different question how long this advantage can be maintained or even expanded.³

In the case of gold, it is about its core function – as a transnational store of trust and value. Gold does not belong to any nation, central bank, or political authority. Its value is not based on a promise, but on the substance itself – on its rarity, durability, and universal recognizability. That is why it functions in systems where nothing else is shared: currencies, borders, and ideologies may change, but an ounce of gold is always the same.

The difference lies in who buys – and why. In a speculative premium, the buyer is an investor seeking return. In a structural premium, the buyer may be the system itself – an actor seeking protection or requiring a certain asset to fulfill its function. In that case, price formation moves away from the world of speculation. And although part of gold’s recent rise has been market-driven, a growing share of it appears structural: the use of currency as a geopolitical weapon has created the need to protect against it.⁴

Markets chase yield, systems chase trust.

–Marko Viinikka
Founder, CEO
Voima Gold Oy

¹ The idea of the image comes from Matthew 7:24–27 — the parable of the wise and foolish builders

² Pets.com was listed on Nasdaq in February 2000. The company had never made a profit, but its sock-puppet mascot was everywhere on television. A year later, the stock had collapsed by 99 percent and the company was shut down. The mascot was sold at auction for 125 dollars.

³ In 2007, Nokia controlled over 40 percent of the global mobile phone market and appeared to be a permanent structural winner. But the advantage could not be maintained or expanded. The market share was seen as structural and almost certain — yet the iPhone’s user experience alone was enough to destroy it.

⁴ It is worth remembering, however, that central bank purchases – and often also their sales – are political and reversible. They can buy for years and sell within months. Political leadership can, for instance, force a rotation back into the dollar or into something entirely different, such as crypto assets. Institutional demand is not a permanent law of nature – it is almost entirely programmable.

Disclaimer: Voima Weeklies are the personal writings of the undersigned. They do not necessarily represent the official view of Voima Gold Oy or any other company, nor do they constitute investment advice or a recommendation to purchase securities.