Gold is the world's premier safe-haven asset and store of value. Traded as XAU/USD (price per troy ounce in US dollars), it has served as money and a wealth preservation tool for thousands of years.
Why It Matters
Gold is unique among commodities because its demand is driven primarily by investment and central bank reserves rather than industrial consumption. Central banks collectively hold over 35,000 tonnes of gold, and purchases by central banks (especially China, India, Turkey, Poland) have been a major price driver.
Key Price Drivers
1. Real interest rates: Gold's primary driver. Lower real rates (nominal rate minus inflation) reduce the opportunity cost of holding non-yielding gold
2. US dollar strength: Gold is priced in dollars, so a weaker dollar makes gold cheaper for international buyers
3. Geopolitical risk: Wars, sanctions, financial crises drive safe-haven demand
4. Central bank buying: Structural demand shift as emerging market central banks diversify reserves away from US Treasuries
Market Impact
Gold above $2,000/oz signals elevated uncertainty. It moves inversely to real yields and the dollar. Gold miners (GDX, GDXJ) provide leveraged exposure to gold price movements.