A scenario-based thinking tool for the gold price
Gold has no built-in return; it pays no interest or dividends. Its price is determined by the trust people have in paper money and the future. Over the long term, four main factors drive the price of gold: the gap between money creation and inflation, real interest rates, central bank purchases, and investor demand.
When real interest rates are high, holding cash becomes more attractive; therefore, the opportunity cost of holding gold increases, and its price is suppressed. When real rates are low or negative, this dynamic reverses. When money is printed rapidly while the production of goods and services remains unchanged, the unit value of the currency drops. Gold, an asset with a very slow-growing supply, eventually reflects this depreciation in its price.
No single indicator is enough on its own; the exact same inflation rate can produce completely different gold prices under varying interest and demand conditions. The deciding factor is the combination of these variables; in other words, the scenario.