Two glittering commodities went in opposite directions this year. Anglo American, the parent of De Beers, posted a $3.7 billion loss and is racing to sell the diamond business after writing its value down again. Meanwhile Newmont and Barrick, the world’s two biggest gold miners, are posting operating margins near 50%. Same basic business — dig something shiny out of the ground and sell it — wildly different outcomes. The gap comes down to institutional demand: whether the people who eventually buy the thing include buyers who don’t care about price.
Every priced object has a floor made of whoever keeps buying it. Some buyers show up because they feel like it — a mood, a trend, an occasion. That’s the shakiest kind of demand, because when the mood changes, the whole floor can vanish at once. Diamonds ran almost entirely on this kind of demand: the idea that an engagement ring has to be a diamond was a marketing line from the 1930s and 40s, not a natural law. Once fewer couples in Korea and China were getting married, and the ones who did started spending on trips and experiences instead, that floor started eroding — years before lab-grown diamonds ever entered the picture. The lab-grown stones just arrived after the real buyers were already leaving.
Gold has that same fickle layer of buyers too, but it also has a second, sturdier one that diamonds never had: central banks. In 2022 and 2023, the world’s central banks bought more than 1,000 tonnes of gold each year — roughly double the average of the previous decade — largely because Russia’s foreign reserves being frozen after its invasion of Ukraine made other countries nervous about parking too much wealth in someone else’s currency. A central bank doesn’t buy gold hoping to flip it for a profit; it buys because a rulebook or a fear says it should, regardless of price. That’s institutional demand, and it’s a floor that doesn’t care whether gold jewelry is fashionable this year. (A related idea is already at play in the Treasury market, where a new class of forced buyer has been propping up demand.)
None of this means gold is bullet-proof — central banks can stop buying, and gold has spent long stretches falling even after major peaks. But the question worth asking about any asset isn’t just “who buys this,” it’s “does anyone have to buy this, whether they want to or not.”
Not advice. Just how I see it.