What is gold actually responding to?
Gold is the one commodity most people have an opinion about and almost nobody can describe mechanically. The mechanics are unusual, and they start with a single ratio that separates gold from every other commodity in this course.
Stock versus flow
Roughly 210,000 tonnes of gold have ever been mined, and essentially all of it still exists — in vaults, jewellery boxes, and central bank reserves. Gold is not consumed; it is moved. Annual mine production is about 3,600 tonnes.
3,600 ÷ 210,000 = about 1.7%.
New supply each year is under two percent of the stock that already exists. Compare that with oil, where essentially the entire "stock" is burned and replaced every year, or with wheat, where last year's crop is largely eaten before the next one arrives.
The consequence is decisive. Gold's price is set almost entirely by who wants to hold the existing stock, not by production. A mine strike that removes 50 tonnes is 1.4% of annual supply and 0.02% of the stock — a rounding error. For copper the same disruption would be a genuine event. When you read that a gold mine has flooded, the correct first reaction is that it barely matters to the price; when you read that large holders are reallocating, it matters a great deal.
What gold competes with
Gold produces no income. It has no coupon, no dividend, no yield of any kind — and it costs a little to store and insure. So its natural competitor is the safest income available: a government bond.
The standard framework compares gold with the real yield — the return above inflation on an inflation-protected government bond. If that real yield is 2%, then choosing to hold a non-yielding metal instead carries an opportunity cost of about 2% a year. If the real yield falls to 0%, that cost disappears. If it goes negative, holding the metal costs less than holding the bond.
Treat this as a relationship, not a law. It has held for long stretches and broken down for others — most visibly when large-scale official-sector buying dominated the flow. Central banks bought over 1,000 tonnes a year on a net basis in 2022, 2023 and 2024, an enormous, price-insensitive source of demand that is executing reserve policy rather than trading a view.
The four demand blocks
Gold demand splits into: jewellery (the largest single block, heavily concentrated in India and China and genuinely price-sensitive), investment (bars, coins and physically backed exchange-traded products), central bank reserves, and a small industrial/technology share.
What makes gold strange as a commodity is that these blocks trade with each other. Jewellery is recycled into bars when prices rise; bars come out of vaults into jewellery when they fall. Above-ground stock is not inert — it is inventory that responds to price, which is precisely why mine supply matters so little.
Silver, platinum and palladium
The "precious" label hides very different animals.
Silver is a hybrid. Over half its demand is industrial — solar cells, electrical contacts, brazing alloys — while the rest behaves like gold's demand. So silver responds to both the monetary story and the manufacturing cycle, which is a large part of why it typically moves further than gold in both directions. Contract sizes on COMEX: gold 100 troy ounces, silver 5,000 troy ounces.
Platinum and palladium are industrial metals wearing a precious label. Autocatalysts dominate demand — palladium historically in petrol engines, platinum in diesel and increasingly in hydrogen electrolysers. Supply is extraordinarily concentrated: South Africa for platinum, and South Africa and Russia for palladium. When supply sits in two countries, single-country events — a power crisis, a sanctions decision, a shaft failure — move the price hard, and the "precious" framework is close to useless for explaining it.
In the data
The prices most people quote for gold and silver are the COMEX futures, both in dollars per troy ounce. The latest of each is below.
On 29 September 2026 gold stood at $4,172.70 and silver at $61.01, a gold/silver ratio of 68.4: one ounce of gold bought a little over 68 ounces of silver. Because both legs share a unit, the ratio is a pure number, comparable across decades.
Try it now
- Both metals are below, five years of each. Read a close off both on the same date and divide gold by silver. That ratio is the industrial-versus-monetary tug-of-war in one number, and it is dimensionless — both legs are dollars per troy ounce.
- Do it again at three more dates and note where the ratio stretched widest and narrowest. Then Measure both charts across the same window and compare the two percentage moves: silver's larger swings are the hybrid demand base showing up as volatility, and they are what moves the ratio.
- Recompute the stock-to-flow ratio if annual production rose 20% to 4,320 tonnes. (4,320 ÷ 210,000 = 2.1%.) Then say in one sentence why even a large production surprise is a small event for this metal. That is a statement about market structure, not about where the price goes.