When and why will the gold rally end?

Gold continues to update all-time highs. Last week's close was at $2,330 per troy ounce. There is a crucial point in this trend that is almost ignored by analysts.

The growth is focused solely on the real metal. Gold ETFs are being sold off by investors. That is, the share of paper gold in the market is getting lower. But global central banks are buying physical gold in huge (by average historical standards) quantities.

When will the rally stop? We do not know the answer to this question. Gold is out of the corridor it has been in for more than 10 years. Huge momentum has been built up that can move forward for a long time to come. This is the technical point of view.

The fundamental one remains unchanged. Why are central banks buying more and more gold for their reserves? Because there is uncontrolled printing of fiat money. And also the growth of government debt in most developed countries. For example, the U.S. national debt is growing $1 trillion every 90 days. And this process is accelerating.
What needs to happen to reduce this demand? The question is wrongly posed. In the coming years, without a fundamental change in the monetary policy of the Federal Reserve and European central banks, the demand for physical gold will not weaken.

But supply may increase. And this is the main factor that may cause the rally to stop. The more gold is worth, the more it will be produced. Just like in the oil market, where profitability determines the reopening of new wells. So in the gold market, the development of many deposits only becomes profitable at levels above $2,000.

But if the price rises to $2,500 and, no less importantly, stays there for a long time, there will be more people willing to invest in real gold mining. The main factor here is the time lag. It is impossible to open gold mining instantly. For new deposits it takes several years. And for frozen ones, at best, many months.

Most likely, this is the only factor that over time will help to increase supply rather than reduce demand for gold. Having levelled the imbalance that is currently present in the market.