The $5,000 Gold Illusion: What Happens If the ‘Safe Haven’ Narrative Dies?

Why Gold’s Value Is Driven by Market Perception

Since the dawn of civilization, gold has been considered a highly valuable commodity, first used in religious artifacts in Ancient Egypt and other early civilizations, and later as a currency.

The reason for this use is that in pre-modern times, the rarity of gold and the costs of its extraction made it inherently valuable and an easy-to-pick common measuring metric to replace inefficient barter. As only a trickle of gold could be created via mining, this also created a relatively stable supply of money, with inflation only occurring when kings and emperors debased the currency with lesser metals.

The fact that the yellow metal is ultra-resistant to corrosion and easily remelted in smaller or larger units was an extra bonus, making it more flexible than other precious materials like silk or precious wood, for example. For the same reasons, silver was also traditionally used in high-value coinage.

However, from the Renaissance to modern times, money started to mean something different from gold & silver coinage. More complex economic systems, the emergence of stable and international banking, regular use of debt, and stable centralized government progressively introduced the idea of currencies that derived their value not from their physical properties, but from law, jurisdiction, and economic stability.

As a result, silver and then gold progressively lost their place at the center of the world’s economic system, to be replaced by “fiat” currencies, whose value is linked to the backing of a given nation-state and government.

Today, non-physical but supply-constrained alternatives exist as well, with cryptocurrency, the first of which is Bitcoin.

Lately, gold has risen in price strongly, which has led many gold supporters to claim it is gaining back its role as a currency. But at the same time, this illustrates the profound vulnerability of gold’s value: it is only valuable because people think it is, with few real-world applications for the metal, despite its remarkable electrical and corrosion properties.

How Gold Prices Are Actually Determined

Gold’s Limited Industrial Demand Explained

When we think about gold, we think of ancient artifacts from the tombs of kings of old, jewelry, or even the gold bars held by central banks around the world. And this perception is correct.

Most of the gold in the world is used as a “reserve of value”, with little practical use made of the yellow metal. Currently, newly mined gold is primarily used for applications that preserve it for later use, be it jewelry (40-50%), private investment (20%), or purchases by central banks (10-15%).

As a result, industrial demand, which actually consumes the produced gold, represents barely 7-10% of the total gold produced yearly.

Source: Bullion Vault

This raises the question of what drove the recent massive rise in gold prices, making it one of the top-performing assets in 2025 and early 2026. If no one really “uses” it, where does the newly mined gold, up to 3,500-3,600 tons per year, go?

Source: GoldPrice

Central Banks & Gold

It seems a key answer has been a regime shift after the financial crisis in 2008, where central banks stopped being a net seller of gold, providing the market with abundant supply from their massive reserves (see more on that topic below). Instead, central banks became net buyers of gold, purchasing 500-1,000 tons every year, with non-Western central banks largely driving the shift.

This number could even be a massive underestimation, as the governments of sanctioned nations like Venezuela, Iran, or Russia, as well as China, might have purchased gold through indirect means, not reported as central bank purchases.

Some speculations push the estimate as far as 30,000 tons of gold accumulated by China through its domestic production and import via commercial banks, which would be >10x larger than its officially reported reserves of 2,300 tons.

Source: Bullion Vault

This, however, brings a difficult question for gold bulls. Is the price of gold today entirely dependent on the opinion of a handful of countries that gold is still relevant as money? And if so, what would happen if they change their minds?

Risks To Gold Value

The Stockpile Problem

What initially made gold so valuable as coinage, its durability, could also become its main weakness in modern times. Because it is still highly valuable and never corrodes, most of the gold mined in the past is still usable today.

The only reason gold is not widely accessible and priced lower is that most of it is locked in the vaults of central banks, financial institutions, and wealthy investors, and in the form of jewelry.

In total, an estimated 212,000 tons of “above-ground supply”, or gold already mined and usable today, exist, massively larger than the 3,500 tons produced annually by the gold mining industry. In fact, this is more gold already mined than is left to be found in the ground.

Source: Visual Capitalist

So if any of this stockpile started to be sold, this could create a flow of fresh gold supply as large or larger than the current mining production. Due to the massive scale of the stockpile, such a situation could go on for decades before the inventory starts to wear thin.

What Silver’s History Says About Gold’s Future

Silver provides an interesting comparison to gold as it used to be a monetary metal, forming the base of coinage for ancient civilizations in Greece, China, and the early Islamic Caliphates.

However, it stopped being used seriously as a monetary metal as soon as the 19^th century, replaced by the gold standard, and was last present in some form in US coins more than 50 years ago, with the final removal of silver from coins in 1971.

As a result, silver prices long stagnated and stubbornly refused to react as a monetary metal, fluctuating to the rhythm of geopolitical or economic crises.

Instead, silver is currently used half as a luxury product for jewelry, and half as an industrial commodity for its remarkable properties in terms of antibacterial activity, electrical conductivity, resistance to corrosion, light reflectivity, etc.

This does not mean that silver cannot be a good investment, and it actually exploded in value in 2026 (before falling back somewhat). But the key driver of this price surge was surging industrial demand, causing depleting inventory, mostly from the enormous ramp-up of solar panel production.

So if silver is an example, a demonetized gold could remain stagnant for decades, and only see a price surge in case of short supply and high industrial demand. A situation that could take decades to materialize, considering that gold above-ground inventories are very large.

And like silver, gold has very valuable physical properties that make it a very useful industrial metal.

Could Gold Become an Industrial Metal?

In such a scenario, the determining factor of gold prices would not be its perceived value as a monetary metal, but simply supply and demand.

Even in the scenario of total demonetization, it is likely that international central banks will not look to sell their gold at a loss, so a slow and steady stream to avoid breaking the market would be more likely than price-insensitive sales.

So, as with other industrial metals, the price of gold would be determined by the balance between supply and demand.

On the demand side, it is likely that the aesthetic and history of gold will maintain a relatively high demand for jewelry, in the same way as diamonds, which is still somewhat popular even if it can be mass-manufactured in labs.

But it is in industrial applications where a cheaper demonetized gold could thrive:

• Electronics, thanks to their high electrical conductivity and resistance to oxidation.
• Aerospace, for its almost perfect reflectivity of infrared radiation and high thermal conductivity.
• Medicine: with gold-nanoparticle high biocompatibility already used in cancer treatment, diagnostics, and dentistry.
• Clean Energy: gold is a powerful catalyst for fuel cells, hydrogen production, etc, and a demonetized gold would be cheaper than rarer platinum and palladium.

On the supply side, the key metrics would be All-In Sustaining Cost (AISC), a metric used by gold miners to reflect the total cost of mining, including capital expenditure, permitting, environmental regulations, etc.

AISC has been rising in the past few years, driven by energy costs and depletion of the most concentrated gold ore deposits.

Source: World Gold Council

Standing around $1,400-$1,500 per ounce of gold, the current AISC will probably rise further in the case of durable higher oil prices, making an AISC of $2,000/ounce possible. This would, however, still fall short of the recent >$5,000/ounce gold prices, reflecting the gap between current gold value and gold’s potential price if it loses its position as a monetary reserve.

Is Gold Overvalued as a Safe Haven?

Historically, gold has been a “safe haven” for capital during economic crises, wars, and other troubled times. And certainly, some investors and several national central banks are still seeing it this way.

However, for the first time in history, the alternative is not just between not-so-reliable fiat currency of over-indebted governments and gold, but also the option of Bitcoin, a cryptocurrency designed to replicate the best core features of gold on steroids: hard cap to supply, fungibility, safety, etc. Meanwhile, Bitcoin as “digital gold” is also adding unprecedented ease of transaction, a permanent ledger, and possible additional features thanks to a flexible code.

The jury is still out for the future of Bitcoin and gold as money, as the trust in many fiat currencies is eroding.

It is possible that both will coexist, as gold still has appeal to millions of investors who use Gold IRAs, gold brokers, or direct purchase of physical gold. In that case, it is yet to be seen how much the current bull run in gold has priced in this role for the yellow metal.

Or it is possible that in the long run, gold will join silver in the category of rare metals which are very useful for high-tech applications, but not playing a significant role in the monetary system, with cryptocurrency like Bitcoin and eventually other algorithmic solutions playing the role that gold used to assume in the pre-modern ages.

So, except if they have a very strong opinion, most investors, dubious of the path of fiat currency, can invest in both crypto and gold, capitalizing on the fact that at least one of them, if not both, will be the beneficiary of future debt crises.

Investing In Industrial Gold Production

Newmont

If gold turns into an industrial metal, the larger, more diversified, and lowest-cost producers will still be profitable, while smaller, more marginal gold deposits might struggle to make money.

Newmont is the world’s largest gold miner by production, now far ahead of its closest competitors, Barrick Gold, since the acquisition of NewCrest in 2023 for $16.8B. This was following another acquisition of GoldCorp for $10B in 2019.

The company is mostly producing from mines in the Americas and Australia, and is also a producer of copper, a metal in increasingly high demand for electrification and tech applications. It has massive reserves underground, that can be progressively mined, quicker or slower depending on the current price of gold.

Source: Newmont

With an AISC fluctuating around $1,600 per ounce of gold (including copper sales), Newmont would stay highly profitable with strong margins even if the gold price were to collapse and be divided by half.

The company is also a leader in sustainable mining, ranked the most transparent company in the entirety of the S&P500 by Bloomberg, and was ranked #2 out of 100 apparel and extractive companies in the 2023 Corporate Human Rights Benchmark.

So, whether it is to bet on rising gold prices from investors looking for a haven, or to count on a stable provider of a very useful industrial metal for high-tech applications, Newmont can provide a relatively safe bet on profitable gold production, independent of the potentially wild swing in public sentiment around the yellow metal.

(You can read more about Newmont in our dedicated investment report on the company.)

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