The Best-Kept Secret About Gold

Written by Luke Burgess
Posted April 5, 2023

There is a bit of an oversight in the world of gold.

If you do an internet search for reasons to invest in gold, you’ll find the same answers repeated over and over, and those reasons tend to be:

  • Inflation protection
  • Geopolitical uncertainty
  • Market volatility
  • Increasing demand
  • Supply constraints

All of these things are true and very good things to consider when investing in gold.

But one thing that’s very rarely mentioned is consumers who end up buying gold with no intentions of investing at all.

We tend to think of gold only as an investment vehicle, but that’s not exactly the case.

The truth is everyone buys gold.

You might not own any gold bullion coins and bars, but chances are extremely high that you’re a gold consumer.

Have you ever bought any gold jewelry?

Even if it was 10k or 14k, there was still gold in it.

How about electronics?

If so, you’re a gold consumer.

According to the World Gold Council, jewelry accounted for almost 44% of total gold demand in 2022 and that’s after falling 3% from the previous year.

Meanwhile, the WGC says a little over 5% of total gold demand went into electronics last year.

On the other hand, the WGC calculates that investment demand — coins, bars, ETFs, and other Western-recognized investment vehicles — accounted for about 23%.

bf

Now, you’ll notice that I used the phrase “Western-recognized investment vehicles.” That’s because I know that in many other countries (particularly India and China) gold jewelry is often bought as an investment and/or wealth protection. India and China combined account for about half of the world’s gold jewelry demand.

However, there is still a very large market for gold jewelry and electronics that really has nothing to do with investing. It’s simply a market of gold consumers.

For example, here in the U.S., there are few people who buy gold jewelry as an investment seeking to profit. Most of the time, it’s a gift. So buying jewelry for most people is kind of like the opposite of a personal investment for profit.

Now, you might think that buying a wedding ring once and a new laptop every five years doesn’t have a significant impact on the global gold market, but gold might be much rarer than you think.

There are several estimates of how much gold is above ground that’s the gold available to own.

Those estimates range from 185,000 tonnes–240,000 tonnes.

Either way, it means there is less than 1 ounce of gold available right now for every person alive.

One ounce! That’s it. If everyone in the world wanted 1 ounce of gold right now, there wouldn’t be enough to go around.

So owning just a few grams of gold does make an impact on global demand. 

And this is what I think is one of the best-kept secrets about gold: It’s much rarer than most people think. I believe we end up seeing a lot of fake gold and gold-colored metals everywhere and assume gold is more available than it really is. But the fact is there really isn’t much gold to go around.

Of course, most of the world’s gold demand comes from those looking to hedge or leverage market forces. However, the fact that there really isn’t that much above-ground gold means consumers who don’t even care about investing for profit make a significant impact on the market as well.

At the very least, these consumers are something else to consider as part of the large web of factors pulling and pushing the gold market.

Until next time,
Luke Burgess Signature
Luke Burgess

Luke’s analysis and market research reach hundreds of thousands of investors every day. Through his work with the Outsider Club and Junior Mining Trader, Luke helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

Banking Crisis Just Kicked into High Gear