Neither the financial press, nor academics have reached agreement on gold’s nature and the drivers of its price. In fact, no other asset divides opinions so sharply. Have you ever seen people passionately discussing the nature of copper or the Australian dollar? Probably not, while gold kindles really extreme opinions. There are true gold bugs, who regard the yellow metal as the ultimate money and the only store of value, and gold skeptics, like Warrant Buffer, who consider the yellow metal as a “barbarous relic” without any inherent value. The list of conflicting opinions goes on: gold is simultaneously an inflation hedge, safe-haven against financial crises, luxury-consumption good, reserve currency, shiny commodity with no yield, financial asset and an instrument of diversification.

This edition of Market Overview is first issue in a long series, which analyzes the nature of gold and factors driving its price. We explain why the gold market is so complex and what is the unique nature of gold: particularly, we address the old question whether gold is it a commodity or a currency? There are many opinions about what factors drive the price of gold. Among the candidates you will find the mining supply, technology demand, the jewelry demand and central banks’ purchases. Does the production or these categories of gold demand drive the gold price?

The gold market is so complex, that we focus today on refuting some popular myths common in the gold market. Examples of such myths include putting enormous emphasis on declining mining production, rising technology demand, strong Asian demand or high central bank buying volumes, when considering these factors as drivers of the gold prices. We believe that these considerations results from misunderstandings of gold’s nature. Thus, in this edition of Market Overview we wanted to show that gold should be analyzed as a currency or a global monetary asset rather than a commodity.