Why the Gold Price Won't Stop

Market Update - Monday, 23 Feb

It has been a good day as markets kept up with expectations over the weekend. The emerging clarity regarding uniform 15% tariffs for all countries appears to have laid to rest many previous concerns. There was uncertainty about whether certain regions would be more or less competitive than others, but this across-the-board approach has been taken in good stride by the market.

Today proved to be a disaster for IDFC First shareholders as the stock dropped between 16% and 20% following the discovery of a 589 crore fraud within the bank. It is difficult to understand how such lapses occur in digital banks that tout highly auditable, trackable systems and high-technology orientations.

Looking at the Nifty chart, the market is recovering after a sharp decline two days ago. We have seen two days of climbing back, with the Nifty up about half a percent today.

• The Nifty Junior rose 0.39%, while mid-caps remained flat at minus 0.16%.

• Small caps saw a minor gain of 0.43% and banks were up slightly at 1.15%.

• The market has not broken out of its previous range and is currently playing within those boundaries, but it is notably not sulking despite the new tariff clarity.

• Interestingly, gold has started to move upward again. While the current move is only 1%, it is crossing over earlier pivot points and surpassing the two-day high monitored by many traders. There is a possibility that gold could climb further from here.

• Silver is also showing strength, moving up 2.8%, making both metals look somewhat bullish at the moment.

Other Market Triggers

• The Nifty heat map was largely green today, with the notable exception of IT stocks. Reports and forecasts for the IT sector suggest long-term pain ahead, and Infosys dropped another 2% today. The long-term chart for the IT index looks poor, providing little reason for fresh capital to enter these stocks. For those currently holding IT shares, it is a time to return to the drawing board and evaluate if the original reasons for the purchase remain valid. If not, strategies must be re-evaluated.

• The Nifty Next 50 heat map showed mixed results. Stocks like HAL, Mazagon Dock, and JSW Energy were smashed down, while Siemens, Bajaj Holdings, IOC, and BPCL were up.

• UPL tanked 14% on news of reorganization.

U.S. Market Updates

• In the US markets, Alphabet moved up 4%, while Amazon, GE Aerospace, and Netflix saw gains of 2% to 3%.

• The S&P 500, Dow Jones, and Nasdaq all rose between 0.4% and 0.8%, though small caps remained flat. Some of these stocks are part of the Weekend Investing US portfolio.

• Significant gains were seen in Google, Meta, and Apple, while Walmart continued to slide.

What to watch next ?

• A ratio chart of PSU banks versus private banks suggests that PSUs are likely to continue outperforming aggressively.

• After an era from 2005 to 2020 where private banks led, the trend reversed in 2021, forming a strong bottoming pattern that is clearly reflected in current stock prices.

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What To Read This Week ?

🪙 Gold’s Supply-Demand Tug of War: Why the Price Won't Stop

Today we are diving into some fascinating data from a recent Finshots infographic. If you look closely at the global gold statistics for 2025, a very clear—and slightly concerning—picture starts to emerge for those waiting for prices to drop.

The Supply Ceiling: Where Does the Gold Come From?

In 2025, the total global supply of gold stood at approximately 5,000 tonnes. While that sounds like a lot, the sources are surprisingly limited:

• Mine Production: 3,600 tonnes (The heavy lifting).

• Recycled Gold: 1,400 tonnes (Old jewelry and electronics sold back).

The bottleneck? New discoveries are nonexistent. We aren't finding massive new gold veins anymore, meaning the supply is essentially "stuck" while the world’s appetite only grows.

The Demand Surge: Who is Buying?

The demand side is where the math gets aggressive. Here is how that 5,000 tonnes was carved up:

• Investment (Physical & ETFs): ~2,200 tonnes.

• Jewelry: 1,638 tonnes (about 33% of the market).

• Central Banks: 863 tonnes (The RBI, China’s PBOC, etc.).

• Industrial Use: 325 tonnes (Used in high-conductivity chips and tech).

The Changing Equation

The most alarming trend is how quickly demand is scaling. Just a few years ago, Central Bank demand was a modest 200–300 tonnes; it has now nearly tripled to over 800 tonnes. Similarly, investment demand has jumped from 1,200 tonnes to 2,200 tonnes.

When you have a stagnant supply line and a skyrocketing demand curve, the only "relief valve" in the system is the price. To balance the scales, the price must go up.

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