Back in June, gold was trading around $4,400 an ounce.
I told you I thought it was headed to $3,500 by year-end.
Today, with gold struggling to stay above $3,900, that forecast is starting to look a lot more realistic. And I don’t think the decline is over…
The reason has very little to do with chart patterns or market psychology. I believe the huge rally in gold was ultimately driven by a dramatic shift in supply and demand — especially a surge in central-bank buying that absorbed an unusually large share of global production.
Now that relationship is reversing.
In today’s Moneyball Economics, I’ll show you what changed underneath the gold market, why the Iran war actually helped trigger the sell-off and why my models now point to $3,200 gold next year — with $3,000 possible.
Click the video below to get started:
Video Transcript
Welcome to Moneyball Economics. I’m Andrew Zatlin, and the topic today is gold.
I haven’t talked about gold since back in June. Back in June, gold was trading at $4,400, and back in June, I predicted that gold would be trading at $3,500 by year end. Guess what? Looks like we are well on our way there because right now gold is struggling to stay above $3,900.
To understand why I predicted this collapse in gold, you have to understand why gold surged in the first place. Why did it almost double last year? I believe the answer is just fundamental supply and demand.
I mean, at the end of the day, gold is yet another commodity, and we saw some extraordinary things happen in both supply and demand when it comes to gold. Before we talk about that extraordinary movement, let’s talk about ordinary movement. What does gold typically do under ordinary conditions?
Gold is another asset class. It’s like real estate. It’s like stocks and bonds. Every asset class has its own unique set of characteristics. It brings quality to the table that’s going to make it more or less attractive depending on what’s going on in the economic environment around us.
So for example, macroeconomic variables will affect every asset class a little differently. Look at interest rates. Interest rates go up. Well, the risk-free guaranteed return on a T-bill goes up, and by default, every other asset class is that much less competitive, so prices come down.
It comes down even more with gold because gold is a negative yield asset. That’s right. It costs money to hold gold. You’ve got to pay for insurance, security, storage, and so forth. So gold is going to respond a lot greater to changes in interest rates.
Also with the dollar. If the dollar strengthens or weakens, my real estate holdings don’t care, but gold cares because gold is denominated in dollars.
If the dollar gets weaker, for example, the price of gold’s going to go up. And last year, the dollar weakened by 10%.
Gold is also unique. It is a risk haven. A lot of money will flood into gold, buying will grow, demand goes up, price goes up in times of fear. So for example, we saw that October 2023, Hamas attacks and massacres Israelis kicking off a major war, gold surged.
Each of these things I’ve talked about though are ordinary variables, and we are seeing extraordinary things happen with gold.
Take a look at a chart that shows what the S&P 500 has been doing in terms of yield year and year out over the past few years versus what’s been going on with gold. And what you’ll see is they more or less move together, little variations, but suddenly starting last year, wow, gold surged way above the stock market.
And this year, gold has collapsed way below the stock market, and that’s the first indication that something unusual is going on.
And that unusual thing is supply and demand.
Right off the bat, there’s only so much gold being produced in the world over the course of a year. Amongst the buyers of gold are central banks.
Going back in time, the amount of gold being mined, the amount of gold being siphoned off to central banks, kind of steady, didn’t change that much, but conditions changed in 2022. Suddenly we see central banks buying a lot more.
We’re talking about 500 tons of gold more. Suddenly central banks have gone from being 5% of global demand to 15% of global demand of what’s being mined.
This is huge. Any commodity you suck off 15% of that, suddenly you’re going to have prices responding. And it took a little bit of time for the markets to recognize that this wasn’t a one-off, that this was in fact trend because it happened again in 2023.
Instead of about 500 tons of gold being bought every year by central banks, we’re talking almost 1,100 tons. 1,100 tons in 2022, 23 and 24.
Year in, year out, suddenly demand is surging and it takes a while for miners to produce more. So you don’t have a response from supply yet. What happens? Well, guess what? Demands exceeding supply prices grow.
The markets notice this in 2025. Speculators pile in, and you also have other factors that are driving up gold. We got the dollar coming down, interest rates coming down, and then we’ve got Trump tariffs hitting the road, all this uncertainty and craziness. Risk on, folks, jump into gold.
In addition, in the background, we got those sneaky Russians trying to drive de-dollarization. The Russians are constantly trying to destable the US, get the rest of the world trading in things other than dollars. That’s a great idea, and that drives up demand for gold as well.
All these factors are coming into play, but speculation’s a big driver because something else happens in 2025.
The story flips.
Suddenly at $4,000 an ounce, the People’s Bank of China’s buying a lot less gold. Suddenly gold purchases drop by about say 20% from around 1,100 down to about 800 or so.
Suddenly demand for gold is coming down and you know what’s happening? Suddenly we’ve got the miners responding to this demand with increasing their supply.
So as we head into 2026, the circumstances are changing. On the one hand, that supply-demand relationship is starting to shift, demand’s coming down, supply’s coming up, and we’ve got this massive amount of speculation.
When we get to February, what happens? A trigger for a sell-off happens with the Iran war.
Now that may sound counterintuitive, right? Risk on, risk off. If there’s risk off because there’s a major war, everyone piles into gold, except that’s the exact opposite of what’s happening.
The Iran war triggers a lot of inflation and interest rate hiking. The dollar gets stronger. All of these factors trigger a sell-off in gold.
And if all these speculators are out there want to lock in their profits, they’re going to start selling their paper gold, and that’s what happens. Suddenly you’ve got mass selling of gold.
Lock in your profits, walk away.
As prices start to come down, they become self-serving. You’re going to see more and more pricing come down, and now we go back again to supply and demand conditions for this year.
Guess what? Miners have finally responded to this huge surge in demand. Suddenly, the amount of gold that’s being mined and produced has surged. At the same time, the amount of gold purchases has declined even further.
As a result, we’ve gone from having all this supply being sucked off by the central banks to suddenly we’re in kind of an oversupply circumstance.
In fact, Russia’s now dumping gold. They just sold 192 tons of gold to China. They got to fund their war somehow.
So we have now turned the tables. We are now in an oversupply environment.
That $3,500 price was not pulled out of thin air. This is based on me modeling what’s going on with gold and where it’s going to go next.
I believe next year, gold is going to kiss at least $3,200, if not 3,000.
I would not own gold right now if you paid me.
We’re in it to win it, folks, Zatlin out.
