Gold mine production is basically stuck.
Gold is hard to mine. It takes 5-7 years to develop a new mine. Environmental regulations are tight. Permitting is slow. And when you finally start mining, ore grades are declining (just like with silver).
So what happens when demand suddenly spikes 50% in a quarter?
Supply doesn’t follow. It can’t.
This is the same story as silver, but compressed into a much smaller market.
J.P. Morgan’s framework for predicting gold prices is elegant. They found that quarterly investor and central bank demand explains about 70% of quarter-on-quarter changes in gold prices.
Here’s the rule of thumb. You need around 350 tonnes of demand per quarter just to keep prices stable. Every 100 tonnes above that level adds approximately 2% to the quarterly price increase.
In Q3 2025, total demand (investors + central banks) hit 980 tonnes. That’s 630 tonnes above the 350-tonne baseline.
Do the math. That should translate to roughly a 12-13% quarterly price increase. And guess what? Gold prices were surging at roughly that pace.
The mechanism is straightforward. Demand spikes. Supply can’t respond. Prices rise until the market clears (either through higher prices rationing demand, or buyers stepping back).
For 2026, J.P. Morgan projects around 585 tonnes per quarter of demand on average. That’s still 235 tonnes above the 350-tonne baseline. Which translates to roughly a 4.7% quarterly increase. That compounds to roughly 20% annually.
Now, that’s lower than the frenzied pace we’ve seen. But it’s still well above the “stable prices” threshold.
And here’s the key insight. If demand surprises to the upside (as J.P. Morgan notes it has been), prices could spike much faster than expected.
Meanwhile, supply? Inelastic. Stuck. Mines take years to develop. Ore grades are declining. Recycling is limited.
This is why J.P. Morgan doesn’t think gold is at the end of this bull market. They think it’s in the middle.
The structural trends supporting gold are:
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Central bank diversification away from dollars (multi-year trend)
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Investor de-risking and hedging (early innings)
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Geopolitical and trade uncertainty (elevated)
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Inflation/debasement concerns (persistent)
Against these trends, what’s the supply response? Mining companies could expand. But that takes 5-7 years. By the time new supply comes online, the macro environment could be completely different.
So gold is in a supply-constrained rally. Demand is up. Supply can’t respond. Prices rise. Investors get nervous about “expensive” gold. Some take profits. But then the macro situation deteriorates further, and they buy back at higher prices.
The forecast of $5,000 by end of 2026 and $5,400 by end of 2027 assumes this trend continues but at a more measured pace.
But J.P. Morgan explicitly notes that risks skew toward much faster price appreciation if:
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Investor diversification accelerates
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Central bank buying surprises to the upside
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Geopolitical risks escalate
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U.S. policy uncertainty increases
Any of those catalysts could turn a $5,000 target into a $6,000+ move much quicker than expected.
The base case? Gold continues grinding higher. The bull case? Gold spikes sharply higher when supply-demand imbalances really start to bite.
Either way, the structural story is the same. Supply constrained. Demand accelerating. Prices go higher.