Most people assume gold prices move like any other commodity: more supply, prices fall; more demand, prices rise.
But gold is different.
Unlike oil or natural gas, gold is not consumed – it is stored, transferred, and held. This changes the rules of the game.
The key player isn’t the mines – it’s The Conviction Buyers
Goldman Sachs points out that mine supply is relatively fixed and price-inelastic, meaning it doesn’t change much when prices rise. Instead, around 70% of monthly gold price moves are driven by what they call "conviction flows", which include:
- Central banks
- Exchange-Traded Funds (ETFs)
- Large speculators
Each has different motives – central banks buy for financial or geopolitical reasons, ETFs react to interest rate changes, and speculators follow market trends – but their price impact is similar.
Why do central banks matter so much?
Goldman estimates that every 100 Tonnes of net purchases by conviction buyers can lift gold prices by about 1.7%. That’s significant in a market of this scale.
After the 2008 financial crisis and especially following the freezing of Russia’s reserves in 2022, central banks shifted from being net sellers to strong buyers, driving prices higher.
Mining doesn’t set the tone.
Mine production is steady and rarely responds to price spikes.
Meanwhile, households in emerging markets rarely sell their gold, keeping it locked away even during rallies.
This means that when central banks or ETFs buy aggressively, prices can move sharply without any meaningful change in supply.
The bottom line
Gold’s price equation is simple:
Net conviction purchases ÷ mining supply = price trend
That’s why even a modest shift in central bank buying can create disproportionately large moves in gold.
Expert Advice: Is Now a Good Time to Buy?
Our gold experts confirm that gold remains one of the safest assets for protecting savings over the medium and long term.
If you're considering buying, the best time is always when you have a clear plan: Is your investment short-term or long-term?
Currently, the market is experiencing global volatility, which opens up good opportunities to enter gradually rather than waiting for the "perfect time," as trying to time your purchases with the market may miss opportunities.
We recommend purchasing quantities that fit your budget at different prices and taking advantage of current prices before any potential sudden movements.
With current prices, buying gradually is better than waiting for the perfect time, as the perfect time may never come.
We recommend purchasing quantities that fit your budget and taking advantage of current prices before any potential sudden movements in the markets.