Gold & Commodities · Beginner · 4 min

Gold: role, history, myths

You can describe where gold demand comes from, why gold has no yield, and which common beliefs about gold are only partly true.

Old metal, new questions

Gold has been money, jewelry and a symbol of wealth for thousands of years. Central banks still hold large amounts of it, and in every crisis, headlines ask whether now is the time for gold.

Gold also attracts more myths than almost any other asset. Some beliefs are true, some are half true, and some are simply marketing. This lesson looks at what drives gold, where it comes from historically, and what it can and cannot do.

Jewelry, investors, central banks

Gold demand comes from a few large groups. The World Gold Council's report for 2025:

Investment: 2,175 tonnes, through bars, coins and exchange-traded products. This was the main driver of a record total demand of 5,002 tonnes.
Jewelry: 1,638 tonnes, down from the year before as prices rose sharply.
Central banks: 863 tonnes, lower than the three years before, but well above the 2010 to 2021 average.

Some gold is also used in electronics and other technology.

Historically, gold backed money. Under the post-war system, the US exchanged dollars for gold at a fixed price for foreign governments. In 1971, it ended that convertibility, and since then the price of gold has floated freely in the market.

Three features shape how gold behaves today:

No yield. Gold pays no interest or dividends. When interest rates rise, holding gold becomes relatively more expensive, which can weigh on its price.
Priced in dollars. Gold is mostly quoted in US dollars, so dollar moves affect it, as a later lesson explains.
Crisis demand. Gold is often seen as a safe haven, an asset investors seek in times of stress. It often rises in crises, but not always: in sharp market sell-offs, some investors sell gold to raise cash.

Over long periods, gold has kept its value against inflation. Over shorter periods, its price has fallen or stagnated for years while consumer prices rose.

Safe haven, mostly

A fictional market crisis begins. Stocks fall 20% in a few weeks.

In the first days, gold falls 4%, as some investors sell whatever they can to cover losses elsewhere.
Over the following months, investment demand for gold rises, and central banks keep buying. Gold ends the crisis 12% higher.
A year later, rising interest rates make bonds attractive again, and gold gives back half of its gain.

Gold behaved like a safe haven over the crisis as a whole, but not in every week, and not forever.

Common mistakes

"Gold always protects against inflation." Over years, it can move the other way.
"Gold never falls." It has seen long and deep declines.
Ignoring that gold pays nothing. Holding it has an opportunity cost.
Buying gold in a panic. Prices are often highest when fear is greatest.

The takeaway

Gold is demanded for jewelry, investment and by central banks. It pays no interest, can swing hard, and is no sure inflation shield.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the largest source of gold demand in 2025.

Tap the chart.

The World Gold Council reports investment demand of 2,175 tonnes, the main driver of record total demand in 2025.
2What happened in 1971 that changed the role of gold in the monetary system?

In 1971, the US stopped exchanging dollars for gold at a fixed price, and gold's price began to float.
3Why can rising interest rates weigh on gold?

The opportunity cost of holding a non-yielding asset rises when interest-bearing assets pay more.
4Is gold a reliable protection against inflation every year?

Over long periods gold has kept value, but over shorter periods it can move against inflation for years.

of 4 correct.