Gold Valuation Framework

Gold does not fit within traditional valuation models. Its demand can be boosted by economic growth as well as by uncertainty and, since gold is a global asset, demand tailwinds from one region may counteract headwinds from another. These seeming contradictions pose their own challenges but also give gold its core characteristics as a unique investment. Our research shows that valuing gold is intuitive. In essence, its equilibrium price is determined by the intersection of demand and supply. And understanding the underlying drivers and interactions of gold demand and supply gives investors a robust framework upon which to determine gold’s performance. Market equilibrium methodology 1. Determine drivers of demand and supply 2. Estimate expected demand and supply 3. Calculate implied equilibrium price Segmenting demand and supply Gold Valuation Framework in practice Appendix I: Accuracy of Model v 1.0 Explanatory power (goodness of fit) Directional accuracy Appendix II: Model v 1.0 in detail Jewellery Technology Identifiable investment Central banks Implied investment Mine production Producer hedging Recycling