So if the market is efficient, gold is not over priced, it is the right price for today. Perhaps not for tomorrow., So what is making it that price, as it must be supply and demand? If supply and demand is as efficient as you claim, then gold is not overvalued.
If the market is not efficient as you seem to claim, by your fundamentals approach, one which is impossibly complex usually, then gold could be overvalued, or undervalued. If the supply is fixed by the slow nature of production changes, then it is more likely it is undervalued.
Does the sale by Central Banks change the amount of gold in the world? No. So how does it effect supply? It does not. It effects the market today. But not tomorrow.
If gold is not an elastic commodity then it does not respond to supply and demand as you claim, except weakly over long periods. After all, how long does it take to start a gold mine, or increase production worldwide significanlty? We should not then expect sharp curves, except in the classical commodity sense of perception of scarcity, and sudden rise.
We cannot oversimplify here because gold may not react all the time to the same variables in the same way. In some periods it has climbed markedly with inflation. At other times it has remained undervalued.
It may react to supply and demand of the dollar. Could this be more important?
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