What drives gold prices more: Supply or demand? - CBS News
To understand whether supply or demand plays a bigger role, we spoke with experts who are well-versed with the gold market. Below, we uncover the main factors that could affect your investment decisions.
Take advantage of gold's rising price by getting invested here.
"Changes in demand tend to move gold prices more dramatically than changes in supply," explains Daniel Boston, founder of Preserve Gold. He says gold mining production has grown just 9% over the past decade, making supply relatively stable.
Kevin Shahnazari, founder of FinlyWealth, highlights demand's immediate impact on gold's value. "When central banks announced major gold purchases last year, I watched prices jump within hours," he says. "Supply changes, [such as] mine openings or closures, typically take months to affect prices."
Understanding how gold prices move means looking at both short-term and long-term factors. Ben Nadelstein, head of content at Monetary Metals, explains that gold is unique because its existing supply is vast compared to new mining output. This means quick price changes usually come from shifts in how people and institutions buy gold, while supply changes play out over longer periods.
Mining supply may not drive day-to-day price swings, but it plays a role in gold's long-term value, according to Boston. Historically, changes in mining supply have influenced price trends. Here are the major supply factors that shape gold prices:
Get started with gold here now.
Demand's impact on gold prices can be sudden and dramatic, causing major swings in a short amount of time. When forecasting gold price movements, watch these three demand factors closely:
Knowing how supply and demand affect gold prices can help you make smarter investment choices. Timing the market perfectly isn't necessary or realistic, however. And with gold prices still below historical inflation-adjusted highs, many experts see room for growth.
"Gold is always available at the right price," emphasizes Nadelstein. He suggests watching demand signals such as inflation expectations and geopolitical risks when planning purchases.
Preserve Gold's Boston recommends a measured approach. Instead of trying to predict price swings, he advocates for dollar-cost-averaging — investing fixed amounts regularly regardless of price. For example, you might invest the same amount monthly in a gold ETF or buy gold bars quarterly. This strategy lets you benefit from gold's long-term trends while avoiding the risks of mistiming market moves.
While demand factors including ETF flows and central bank buying drive short-term price moves, supply trends shape gold's long-term value. Boston suggests watching both sides but reminds us that no single indicator tells the whole story.
Before you invest in gold, share your financial goals and risk tolerance level with a trusted advisor. They can then help you choose the right approach — whether that's buying physical gold, investing in ETFs or exploring other gold assets. Most importantly, work with reputable dealers offering transparent pricing and clear explanations of all associated costs.
Sharon Wu, a senior writer with over a decade of experience, specializes in consumer-focused content covering home and finance topics such as insurance, investments, credit, debt, mortgages and home security.
