Editor’s Note
This article explores gold’s enduring role as a store of value, tracing its journey from ancient currency to a modern safe-haven asset. Understanding its historical performance provides crucial context for today’s investors.
The history of gold as a store of value dates back to the dawn of civilization. From the first coins minted in Lydia in the 7th century BC to the reserves of modern central banks, gold has traversed the centuries while retaining its unique power of attraction. This exceptional longevity is explained by several fundamental characteristics:
A small aside for crypto enthusiasts who make up a large part of our readership: while Bitcoin still has a way to go in terms of universality, the king of cryptocurrencies still shares many attributes with gold.
As with all markets, the price of gold depends on supply and demand. Let’s quickly look at how these two components interact for the yellow metal.
Unlike fiat currency, which central banks can create ex nihilo, gold has a fundamental characteristic: its scarcity. It is estimated that all the gold extracted since the dawn of humanity would fit into a cube barely 22 meters on a side. This physical scarcity is the first pillar of its value.
The global distribution is as follows:
– 46% is in the form of jewelry (94,464 tonnes);
– 22% in bars, coins, and ETFs (45,425 tonnes);
– 17% is held by central banks (34,592 tonnes);
– 15% is used in other sectors, notably technology (30,726 tonnes).
Annual supply, relatively stable (between 4,500 and 5,000 tonnes), rests on two pillars: mining production and recycling.
Mining production today represents nearly 73% of supply. However, it faces major challenges. Not only are deposits becoming more difficult and costly to exploit, but the environmental impact is colossal. Extracting just 20 grams of gold generates tens of tonnes of waste. Geographically, the landscape has shifted: China and Russia now dominate production, a concentration that raises strategic questions in times of international tensions.
Recycling, on the other hand, constitutes a sensitive barometer of price. When the price of gold soars, as has been the case since 2024, it becomes economically attractive again to melt down old jewelry or recover the precious metal contained in electronic waste. This is a crucial but volatile source of supply.
Finally, the maneuvers of producers themselves, via “net producer hedging,” influence the market in the short term. To protect themselves against a price drop, they can sell forward a portion of their future production, temporarily increasing supply. With this practice, prices tend to fall in the short term and rise in the long term.
If supply is structurally constrained, demand is dynamic and reflects the world’s upheavals. It comes from four main sources.
Jewelry: a historical pillar. Its demand is elastic, however: when the price of gold soars as in the recent surge, the cost of manufacturing jewelry increases and consumer demand tends to weaken.
The technology industry: although crucial for advanced electronic components, its relative weight is decreasing due to constant efforts at miniaturization and cost reduction.
Investment: this is the true driver of volatility. Faced with uncertainty, investors, both private and institutional, rush to gold to protect their wealth. This demand is mainly expressed through four main vectors: bars, coins, ETFs, and more recently tokens indexed to the price of the yellow metal. Different players are responsible for making this offer accessible.