🪙 Gold

Gold is the fear metal — the ultimate store of value and safe haven that has preserved wealth for millennia. Unlike copper (industrial demand) or silver (hybrid), gold is driven primarily by sentiment, real interest rates, and monetary policy. Understanding how the gold complex moves — and the massive ETF ecosystem surrounding it — gives traders an edge in timing entries across physical gold, miners, and leveraged instruments.

What makes gold special?

If you’re coming from equities, you might view gold as just another commodity. That’s a mistake. Gold occupies a unique position that no other asset can claim.

The Fear Trade

Gold is the original safe haven. Unlike copper (priced by demand) or oil (supply-driven), gold’s price is driven by fear, uncertainty, and monetary debasement.

The Real Rates Relationship (And Why It Broke)

For decades, gold had a reliable inverse correlation with real interest rates. The logic was simple: gold generates no yield, so when real rates rise, the opportunity cost of holding gold increases.

This relationship broke in 2022.

Since then, gold has rallied to all-time highs despite elevated real rates. What changed?

• Central bank buying: Emerging market central banks (China, Poland, Turkey, India) have been accumulating gold at record pace — over 1,000 tonnes annually since 2022
• De-dollarization: After Russian assets were frozen in 2022, non-Western central banks accelerated gold reserves as sanctions-proof assets
• Fiscal concerns: US debt trajectory and deficit spending have increased gold’s appeal as a hedge against currency debasement
• Geopolitical uncertainty: Persistent conflicts and trade tensions maintain safe-haven demand

For traders, this means: don’t rely solely on real rates to time gold. Central bank flows and geopolitical risk now matter more than they did historically.

Demand Is Diverse

Gold demand comes from four major sources, each with different drivers:

This diversity is gold’s structural advantage: when one source weakens, another often strengthens.

Supply Is Stable (That’s the Point)

Unlike industrial metals, gold supply doesn’t swing wildly:

• Mine production: ~3,300-3,600 tonnes annually, growing slowly (~1-2%/year)
• Recycled gold: ~1,200 tonnes annually, price-responsive
• Above-ground stock: ~210,000 tonnes accumulated over history — gold isn’t consumed, it’s hoarded

This supply stability is by design: gold’s value comes from scarcity and durability, not industrial utility.

Which ETFs should I watch?

Gold has the most developed ETF ecosystem of any commodity. Understanding the landscape is essential for reading capital flows and selecting the right instrument.

Physical Gold ETFs

These hold actual gold bullion in vaults:

For long-term holders: GLDM offers the lowest expense ratio (0.10%). For maximum liquidity: GLD. For physical delivery rights: OUNZ.

Gold Miner ETFs

These hold stocks of gold mining companies, providing leveraged exposure to gold prices:

GDX vs GDXJ: GDX holds established producers (Newmont, Barrick, Agnico Eagle). GDXJ holds smaller, exploration-stage companies with higher beta. When gold rallies hard, GDXJ typically outperforms GDX.

Leveraged & Inverse Gold ETFs

Use case: Short-term tactical trades when you have high conviction on direction. Never hold through volatility clusters.

Related Context

How do the gold ETFs relate to each other?

Gold’s ETF landscape creates meaningful relative value signals. Understanding the hierarchy helps you read money flows.

The ETF Hierarchy: Physical → Miners → Juniors

  flowchart TD
    A[**Physical Gold**<br/>GLD, IAU, GLDM] --> B[**Senior Miners**<br/>GDX]
    B --> C[**Junior Miners**<br/>GDXJ]
    
    A -.- D[Lowest volatility<br/>Institutional benchmark]
    B -.- E[1.5-2.5x gold moves<br/>Dividends possible]
    C -.- F[2-3x GDX volatility<br/>Maximum beta]

GLD/IAU/GLDM — Pure Physical Exposure

• Track spot gold price directly
• Lowest volatility within gold complex
• Institutional benchmark — large funds use GLD for gold allocation

GDX — Leveraged Exposure via Established Miners

• Typically moves 1.5-2.5x the percentage move in gold
• Mining costs, margins, and management quality add equity risk
• Dividends possible (unlike physical gold)

GDXJ — Maximum Beta via Junior Miners

• 2-3x the volatility of GDX
• Exploration risk, financing risk, execution risk
• When gold is running, juniors can massively outperform

The Key Relationship: GDX/GLD

This ratio tells you whether miners are leading or lagging the gold move:

• GDX/GLD rising: Miners outperforming physical gold — equity investors bullish, risk-on within gold
• GDX/GLD falling: Physical gold outperforming miners — defensive positioning, margin concerns, or pure fear trade

This is the critical ratio for understanding gold market health. When miners lead, it signals conviction. When physical leads, it signals caution or pure safe-haven flows.

What moves first in a gold cycle?

Gold cycles can be driven by different catalysts. The sequencing depends on what’s driving the move.

Fear-Driven Rally (Risk-Off)

When gold rallies on geopolitical risk, recession fears, or monetary crisis:

Inflation/Debasement Rally (Structural)

When gold rallies on fiscal concerns, currency debasement, or inflation expectations:

Why identifying the driver matters

Exit signals differ by catalyst:

• Fear rally: Watch VIX and credit spreads. When fear subsides, gold can reverse sharply.
• Inflation rally: Watch real rates and Fed policy. More persistent, slower to reverse.
• Central bank rally: Watch official sector flows. Multi-year trend, less prone to sharp reversals.

Which relative charts should I monitor?

Gold’s multiple drivers require more ratios than a purely industrial metal.

Essential Ratios to Monitor

GDX/GLD — Miners vs. Physical (The Key Ratio)

This is the critical ratio for understanding gold conviction:

• GDX/GLD rising: Miners outperforming — risk-on within gold, equity investors bullish
• GDX/GLD falling: Physical leading — defensive positioning, pure fear trade, or margin concerns

GDXJ/GDX — Juniors vs. Seniors

• Rising: Risk appetite strong within gold — juniors leading
• Falling: Defensive positioning — flight to quality miners

GLD/SPY — Gold vs. Market

• Rising: Gold outperforming equities — safe haven bid, fear rising
• Falling: Risk-on — equities preferred over gold

GLD/SLV — Gold vs. Silver (Gold/Silver Ratio)

• Rising: Fear trade dominant — gold outperforming silver
• Falling: Risk appetite — silver’s industrial side adds to precious metals bid
• For more on silver’s hybrid nature and the industrial demand drivers, see the Silver page

GLD/UUP — Gold vs. Dollar

• Historically inverse: Strong dollar = weak gold (gold priced in dollars)
• Recently decoupled: Both can rise together on geopolitical fear

Secondary Ratios

• GLD/TIP: Gold vs. real rates (historically inverse, now less reliable)
• GDX/XME: Gold miners vs. broad metals/mining
• GLD/BTC: Gold vs. Bitcoin (competing “digital gold” narrative)

Reading the Dashboard

How do I know where we are in the cycle?

How do I put this all together?

Daily Checklist

1. Check GDX/GLD ratio — Are miners leading or lagging physical?
2. Check GLD/SPY — Is gold outperforming the market?
3. Check GDXJ/GDX — Is risk appetite strong within gold (juniors leading)?
4. Check GLD/UUP — What’s the dollar doing?
5. News scan — Fed speakers? Geopolitical events? Contrarian when crowded.

Entry Conditions (Beginning of Move)

• GLD breaking multi-week resistance
• GDX/GLD ratio bottoming and stabilizing
• Central bank buying visible (WGC quarterly data)
• Positioning uncrowded (COT data, ETF flows subdued)
• Catalyst present (rate cuts, geopolitical risk, fiscal concerns)

Exit Conditions (End of Move)

• GDX/GLD ratio breaking down (miners lagging)
• GDXJ massively outperforming (junior speculation)
• Universal bullish consensus, retail excitement
• Leveraged ETF volumes spiking
• Negative divergences on momentum indicators

Quick reference

Sources

Learn more about the contents of this page by reviewing these sources: