Eliza Wong
Gold has long captivated investors, but its price behavior often defies conventional commodity logic. According to a recent analysis by Goldman Sachs, gold behaves less like a consumable resource such as oil and more like prime Manhattan real estate. The reason? Gold isn’t used up—it accumulates, and its value is dictated not by traditional supply-demand mechanics but by the relentless appetite of what the bank terms ‘steadfast buyers.’ Since 2023, gold has repeatedly shattered records, fueled by central bank acquisitions, geopolitical strife, and anticipation of Federal Reserve rate cuts. Nearly all the gold ever mined—about 220,000 tons—still exists today, tucked away in vaults, reserves, or jewelry boxes. Annual production expands this stockpile by a mere 1%, constrained by operational and technical bottlenecks. As Goldman analysts note, ‘You can’t pump gold like oil, but you can bid it away from others. Gold isn’t consumed; it just changes hands and gets repriced.’ This unique dynamic positions gold in a league of its own, where ownership shifts, not depletion, dictate market equilibrium.
Why Gold Defies Traditional Commodity Logic
Unlike oil or natural gas, gold isn’t consumed in industrial processes or energy generation. It persists virtually indefinitely, with its above-ground stock dwarfing annual mine output. This structural reality means that price movements aren’t primarily driven by production spikes or consumption slumps. Instead, gold prices reflect shifts in ownership preferences—who wants to hold it and who is willing to part with it. Goldman Sachs emphasizes that this makes gold akin to scarce urban real estate, where fixed supply and aspirational demand create a distinct pricing model.
The Accumulation vs. Consumption Divide
Consider this: the world’s gold inventory grows slowly, while oil reserves are continuously drawn down. This accumulation effect means that gold supply is largely inelastic—it can’t be rapidly increased to meet demand. Consequently, price surges don’t trigger supply responses as they would with oil. Instead, higher prices may encourage recycling or selling from existing stocks, but the core driver remains investor sentiment and institutional appetite.
Gold’s Dual Buyer Ecosystem
Goldman categorizes gold buyers into two groups: steadfast buyers and opportunistic buyers. Steadfast buyers—including central banks, ETFs, and speculative investors—purchase gold regardless of price fluctuations, driven by strategic or long-term motives. Their consistent inflows provide a solid price floor and momentum. Opportunistic buyers, such as households in emerging markets like India, buy only when prices are favorable, often selling during downturns to realize gains or avoid losses.
Who Are the Steadfast Buyers?
Central banks have emerged as powerful steadfast buyers, diversifying reserves away from the U.S. dollar amid geopolitical tensions. In 2023, central banks purchased a record 1,037 tons of gold, with China, Poland, and Singapore leading the charge. ETFs and speculative funds also fall into this category, often holding gold as a hedge against inflation or currency devaluation.
The Role of Opportunistic Buyers
Opportunistic buyers, particularly in gold-loving nations like India, tend to be price-sensitive. They buy during festivals or weddings when prices dip, but may retreat during rallies. While they provide liquidity and occasional support, their influence is secondary to steadfast buyers’ dominance.
The Manhattan Real Estate Analogy
Goldman’s comparison to Manhattan real estate is astute. Just as prime apartments in Manhattan are limited and coveted, gold’s supply is largely fixed. New construction (or mine output) barely moves the needle. What matters is the marginal buyer—the entity willing to pay top dollar to secure an asset. In Manhattan, steadfast buyers are wealthy individuals or institutions determined to own property there, regardless of cost. Opportunistic buyers might opt for Brooklyn or New Jersey if prices soar. Similarly, in gold markets, steadfast buyers’ actions dictate trends.
Quantifying Steadfast Buyer Impact
Goldman’s research reveals that steadfast buyers’ net inflows explain roughly 70% of gold’s monthly price volatility. As a rule of thumb, every 100 tons of net buying by this group lifts gold prices by approximately 1.7%. This correlation underscores their outsized role in shaping market directions.
Current Market Dynamics and Price Outlook
Spot gold trades around $3,330 per ounce, up 27% year-to-date, buoyed by robust central bank demand and safe-haven flows. Goldman Sachs projects prices reaching $3,700 by end-2025 and $4,000 by mid-2026, driven by sustained steadfast buying and macroeconomic uncertainties.
Geopolitical and Monetary Tailwinds
Rising U.S.-China tensions, Middle East conflicts, and upcoming elections in major economies are fueling demand for non-political assets like gold. Simultaneously, expected Federal Reserve rate cuts could weaken the dollar, making gold cheaper for foreign buyers and boosting appeal.
Investment Implications and Strategies
For investors, understanding gold’s unique drivers is crucial. Unlike commodities tied to economic cycles, gold thrives on uncertainty and institutional accumulation. Allocating a portion of portfolios to gold can hedge against inflation, currency risks, and geopolitical shocks. ETFs, physical gold, and miner stocks offer varied exposure routes.
Risks to Consider
While steadfast buyers provide support, rapid price increases could attract profit-taking from opportunistic holders. Additionally, a stronger-than-expected dollar or delayed rate cuts might temporarily dampen momentum. However, the long-term trend appears solidly bullish. Gold’s behavior mirrors Manhattan real estate more than oil, with steadfast buyers setting the pace. Their unwavering demand, coupled with finite supply, creates a resilient price floor and upward potential. For investors, gold remains a strategic asset for diversification and crisis protection. As global uncertainties persist, its role as a monetary anchor and safe haven will only grow. Monitor central bank activity and ETF flows to gauge future price trajectories—and consider strengthening your portfolio’s golden defenses today.
