The Importance of Market Fundamentals

Understanding the fundamental properties that give gold its value is crucial for grasping its role in the market. Four key principles drive the dynamics of commodity markets: marginal cost of production, marginal utility, cost of storage, and transport costs. In the case of gold, its high marginal production cost, primarily due to the energy-intensive extraction process, reinforces its scarcity and value. Additionally, gold's utility extends beyond finance; its cultural significance in jewelry reflects its historical role as a store of wealth, influencing demand from a broad demographic.