Economics For Everyone: Gold And The World - Part II

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In Part I, we discussed the Significance of Gold since Ancient times, Gold and the Expansion of Global Trade, Gold and the Development of Banking, and the Gold Standard

In Part II, we will discuss the role of Gold in the present time, such as the Geopolitics of Gold, Gold Price Trends Over the Last 50 Years (1975–2025), Gold Performance Across Economic Conditions, Correlation Between Gold and the Stock Market, Global Gold Companies, the world's largest gold producers, Governments and Gold & Gold price

The Geopolitics of Gold

Today, gold functions primarily as an investment and risk-management instrument.

Investors often purchase gold during periods of:

·    High inflation

·    Currency depreciation

·    Geopolitical uncertainty

·    Financial market volatility

During the global financial crisis of 2008–2009, gold prices rose substantially as investors sought safe-haven assets. Similar patterns occurred during the COVID-19 pandemic, when gold prices exceeded US$2,000 per troy ounce for the first time in history.

Gold exchange-traded funds (ETFs), futures contracts, and bullion markets have transformed gold into a highly liquid global asset.

Gold Price Trends Over the Last 50 Years (1975–2025)

The table below uses annual average gold prices in U.S. dollars per troy ounce and highlights major economic events that influenced gold prices. Data is based on historical gold price series from the World Gold Council and Macrotrends. 

Table 1. Gold Price Trends Over the Last 50 Years (1975–2025)

Based on the trend, some key observations are

1.    Gold performs best during inflationary periods and economic crises.

2.    Gold underperforms during periods of strong economic growth and high real interest rates.

3.    Over 50 years, gold appreciated many times, demonstrating its effectiveness as a long-term store of value.

4.    Modern demand is increasingly driven by central-bank accumulation, geopolitical uncertainty, and concerns about fiat currency stability.

To understand gold's role in economic cycles, it is useful to compare its performance against four major macroeconomic indicators: inflation, GDP growth, interest rates, and stock market returns.

Table 2. Gold Performance Across Economic Conditions

Correlation Between Gold and the Stock Market

The relationship between gold and the stock market is often described as weakly negative or near zero over the long run, but it changes significantly across economic cycles.

Table 3. Correlation Between Gold and the Stock Market

The correlation between gold and the stock market is not permanently negative. Instead:

·    During periods of strong economic growth, stocks usually outperform gold.

·    During inflationary episodes, recessions, and financial crises, gold often outperforms stocks.

·    Over the long run, the average correlation is close to zero, making gold an effective portfolio diversifier.

This unique behavior explains why central banks, pension funds, sovereign wealth funds, and institutional investors continue to allocate part of their portfolios to gold despite stocks generating higher long-term returns.

Many of the International publicly listed companies involved in gold mining and refining originate from the US, South Africa, the UK, and Australia.

Table 4. Global Gold Companies

The world's largest gold producers

By annual gold production, the industry leaders typically include:

1.    Newmont Corporation (USA)

2.    Barrick Mining Corporation (Canada)

3.    Agnico Eagle Mines Limited (Canada)

4.    AngloGold Ashanti plc

5.    Gold Fields Limited

6.    Kinross Gold Corporation

7.    Zijin Mining Group (China)

8.    Polyus (Russia)

9.    Northern Star Resources (Australia)

10.     Evolution Mining (Australia)

Governments and Gold

Central banks have accumulated more than 1,000 tonnes of gold annually in recent years, far above the 400–500 tonne average seen during the previous decade. The main reasons are Geopolitical Risk and Financial Insurance, Inflation and Currency Protection, and Strategic Reserve Management.

Some of the top countries holding gold reserves are the United States, Germany, Italy, France, Russia, China, Switzerland, and India, apart from the IMF. The largest producer of gold in the world is China. For overall annual gold demand, China is currently the largest consumer of gold, with India a very close second. The two countries together account for roughly half of global consumer demand for gold.

Gold price

The global benchmark is the LBMA Gold Price, administered by the London Bullion Market Association (LBMA). It is determined through an electronic auction conducted by ICE Benchmark Administration (IBA) twice every business day (10:30 a.m. and 3:00 p.m. London time). Major bullion banks and market participants submit buy and sell orders, and the price is set where supply and demand balance.

In addition to the LBMA benchmark, gold prices are constantly influenced by trading on major exchanges such as:

·    COMEX (New York)

·    Shanghai Gold Exchange (China)

·    OTC bullion markets in London

·    Futures and spot markets around the world

These markets react every second to:

·    Global demand and supply

·    US dollar movements

·    Interest rates

·    Inflation expectations

·    Central bank buying and selling

·    Geopolitical events