Gold holds $4,400 despite quarterly demand softening
Spot gold closed near $4,400 per ounce, holding a significant premium over long-run production costs. ETF flows remain the primary driver of recent price volatility.
Gold prices ended the quarter modestly lower, settling at 4,400 USD per ounce. The metal retreated for most of the period due to weak investment demand. However, recent flows have supported a partial recovery. The current price remains more than double the estimated long-run cost support.
Cost support anchors valuation
Valuation models use a midcycle gold price for long-term projections. This figure applies after the first four years of forecasted cash flow. It reflects the cost required to sustain global supply over time. Higher prices encourage marginal miners to return to the market. This increases overall supply and pushes prices back toward marginal cost.
Macro factors offset interest rates
Tariff concerns and deteriorating fiscal balances in Western governments keep gold elevated. Geopolitical tensions and a weaker US dollar contribute to the premium. These factors offset rising real interest rates. Higher rates increase the opportunity cost for holding non-yielding assets.
Jewelry and central bank demand drops
Jewelry demand typically leads the market but faces headwinds from strong prices. Central bank purchases are trending lower, though levels remain elevated. These institutions continue to diversify reserves while managing inflation. Elevated prices also drive rising recycled supply and the reopening of closed mines.
Mined supply is likely to rise from new developments. The balance between supply and demand remains dynamic. ETF flows continue to act as marginal buyers in this environment.
