Gold is going up because of increased demand in the face of a steady/decreasing supply. So the question you should be asking is "what expectations are causing the increased demand for gold?".
- To my thinking, expectations of a strong rise in inflation is no doubt one of those but not the only one. Behind the inflation expectations is the massive increase in money supply with expectation of more to come.
- Expectation of reduced earnings from ordinary stocks is another factor. Enough people are doubtful about the ability of the massive increase in liquidity to maintain earnings in the face of recurring virus outbreaks with consequent lockdowns around the world, so as to make a difference to gold demand..
- Expectation that currencies will depreciate is a corollary of decreased economic activity in the face of increased money supply.
You will observe that a decrease in the supply of gold will cause an increase in price, while the reverse is also true. Decreased gold production has been a slowly taking place over the past decade or so but the increased investment in gold companies that is now occurring will produce increased output in a few years. However, there is a lag of quite a few years from funding exploration to discovery to development of mines and processing plants to finally production.
Since central banks are no longer releasing gold into the market but rather have been absorbing it in recent times,and since the latest sudden drop in demand for jewellery is not enouigh to make a difference, we can expect a short term squeeze on gold availability in view of the latest "expectations", which of course adds to pricing pressure
However, have you thought about the possibility of governments deciding to take control of gold and reserve it to themselves in order to prop up their currencies, as was done for 40+ years after the 1920's? You can kiss goodbye to all your fantastic expectations of gold profits forever in that case. A fixed rate of exchange for an ounce of gold with every ounce produced sold to the government agency. Long live the gold black market if you want to go there.
