Gold is more like Manhattan real estate than oil, according to Goldman Sachs

Summary

• Gold’s price is driven by ownership changes, not traditional supply-demand dynamics.

• Gold isn’t consumed but accumulated and kept in vaults, reserves, and jewelry.

• Conviction and opportunistic buyers drive it — like Manhattan real estate.

Gold may be a commodity, but its price moves more like prime Manhattan real estate than barrels of oil, Goldman Sachs analysts wrote in a Sunday note.

That’s because, unlike oil or gas, gold isn’t consumed. It’s accumulated. Buyers have been flocking to the precious metal in recent months, pushing gold to ever-higher price records.

Nearly all gold ever mined — about 220,000 metric tons — still exists, mostly locked in vaults, central bank reserves, or jewelry boxes. New annual production adds just over 1% to the existing stock and is capped by operational and technical constraints.

“You can’t pump gold — but you can bid it out of someone’s hands. Gold doesn’t get used — it changes hands and gets repriced,” wrote Goldman Sachs’ analysts.

“The gold price reflects who is more willing to hold it and who’s willing to let go,” they added.

That makes gold very different from other commodities, where traditional supply-demand dynamics apply and higher prices could choke off demand.

“Its market clears through changes in ownership, not production-versus-use balances,” wrote Goldman’s analysts.

Goldman identifies two groups of buyers: “conviction buyers” such as central banks, ETFs, and speculators, who buy regardless of price, and “opportunistic buyers” — households in emerging markets like India and China — who step in only when the price is right. The second group provides a floor under gold prices during sell-offs, but it’s the conviction buyers who set the trend.

That’s where the Manhattan real estate analogy comes in.

“The total number of apartments is largely fixed, and the small amount of new construction each year is not what drives prices. What matters is the identity of the marginal buyer,” wrote the analysts.

In Manhattan, there are also two groups of buyers: conviction buyers — those with deep pockets who will live there at any cost — and opportunistic buyers — those who will buy only at the right price and are otherwise content to live in New Jersey or Brooklyn, they wrote.

In both markets, prices shift not because of new supply, but because of who takes the keys.

Goldman’s analysis finds conviction flows explain about 70% of gold price’s month-to-month moves. As a rule of thumb, every 100 tons of net buying by conviction buyers pushes prices up by about 1.7%.

The investment bank’s analysis comes during a volatile year for gold. Prices surged to a record above $3,500 per ounce in April after President Donald Trump announced sweeping new tariffs on trade partners and amid concerns over the Federal Reserve’s independence.

Spot gold is now trading around $3,330 per ounce and up about 27% year to date.

Goldman Sachs forecasts spot prices will reach $3,700 per ounce by the end of 2025 and $4,000 per ounce by mid-2026.