Gold Market Analysis and Structure

If you are operating in the commodity market, you need to have an idea of the structure and dynamics of the supply and demand of the assets. Oil is a typical example, which is rapidly recovering lost positions, thanks to the growth prospects of global demand and the contraction of the surplus in the midst of the opening of the major world economies. Unlike Brent and WTI, gold is less sensitive to the conjuncture of the physical asset market, but at any time it can punish a trader who ignores the fundamentals.

Global demand for precious metals is dominated by jewelry and investment, which accounted for 48.5% and 29.2% in 2019. The share of gold purchased by central banks was 14.8% and the share of its use in the industry was 7.5%. The last indicator is very important. The fact is that silver is considerably higher, and the closure of industrial plants due to the pandemic caused the faster sinking of XAG/USD compared to XAU/USD. As a result, the ratio of the two metals plummeted to historic highs. It is logical that in conditions of recovery of the world economy it makes sense to expect a reduction of the coefficient, that is, to bet on a faster growth of silver compared to gold.