The price people quote is usually a wholesale reference, such as the LBMA gold price, published after an auction. It is a useful public number. It is not a promise that you can buy or sell at that number, and it is not a forecast.
Demand is not one queue
Jewellery is still a large use of gold. Investment demand, including bars, coins and funds, can rise or fall without jewellery doing the same thing. Central banks buy and sell for their own reserves. A busy wedding season and a change in reserve policy are both “demand”, and they do not move the price for the same reason.
Supply is slow
Mined gold does not appear because the price rose this morning. Recycling — old jewellery and scrap — can respond faster than a mine. Neither source tells you what a gram will cost on a Tuesday.
Money and currencies
Gold is usually quoted in US dollars. A move in the dollar can change the dollar price without any change in a mine or a vault. Interest rates matter because gold pays no interest: when the return on cash or bonds changes, the relative appeal of holding metal can change too. “Can” is the right word. The relationship is not a rule you can apply to next month.
What GXLD will not add
This article does not predict a price, a return or a hedge. When GXLD shows a figure, read the label on that figure. A market observation, an estimate on a holding and a quote you can accept are different numbers. The LBMA price is described at lbma.org.uk. How a GXLD quote differs is in Why buying and selling prices differ.
