Gold’s price dynamics are unlike traditional commodities such as oil or copper. Instead of being driven by supply-and-demand consumption, gold behaves more like luxury real estate, where ownership and willingness to hold play a much bigger role than production levels.
Why Gold Differs from Other Commodities
Unlike oil or agricultural goods, gold is not consumed. Nearly all the 220,000 metric tons of gold ever mined still exist today in vaults, central bank reserves, and jewelry. With annual mining adding only about 1% to the total supply, new production has little impact on overall pricing.
This makes gold more like prime Manhattan real estate, where the number of apartments is limited and price is set by the conviction of buyers rather than by new supply.
Two Types of Gold Buyers
Gold demand can be grouped into two categories:
- Conviction Buyers – Central banks, ETFs, and long-term investors who buy regardless of price. They are the real trend-setters in the gold market.
- Opportunistic Buyers – Households and retail investors, especially in markets like India and China, who tend to buy during price dips. They create a floor under prices during downturns.
According to market analysis, conviction buyers are responsible for around 70% of gold’s monthly price movement, with every 100 tons of net purchases boosting prices by nearly 1.7%.
Similarities with Real Estate Pricing
In both gold and real estate markets, the marginal buyer determines price direction. Just as wealthy buyers drive up the cost of limited Manhattan property, central banks and ETFs push gold prices higher by aggressively adding to their holdings.
Current Outlook for Gold
Goldman Sachs recently reaffirmed its bullish outlook, forecasting that gold could hit $3,700 per ounce by the end of 2025, with potential to reach $4,000 by mid-2026. The bank highlighted:
- Strong central bank buying
- Rising ETF inflows
- Off-balance sheet demand supporting higher valuations
With conviction buyers in control and opportunistic buyers providing price floors, gold continues to act more like a store of wealth than a consumable commodity.
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