By Elliott Wave Trader via Iris.xyz

The general investment public usually applies the same principles when they choose how and when to invest their hard-earned money. (And we wonder why the general public always gets caught holding the bag at the highs and selling at the lows?) And, much of these “principles” are merely phrases which sound reasonable, but when analyzed, one realizes that they are lacking in substance.

One such phrase is that the gold market is driven by supply and demand. It certainly sounds great and has been propagated through the market to make it sacrosanct. But, when you think about it beyond the simple phrase, how does it help you invest? What drives demand? What drives supply?

Well, I think we can all recognize that supply is driven mostly by demand, as the gold mines will ramp production when there is greater demand. While one can always find markets where supply has its own driver, such as the weather in agriculture having an affect upon supply, much of the market is truly focused on the demand for gold. Yet, have you ever heard anyone discuss what drives demand?

In a recent article I read, I think they summed up “demand” quite well (but I will not address the rest of the article which, in my humble opinion, presents old and outdated thinking regarding price drivers):

Demand in economics is the consumer’s desire and ability to purchase a good or service. It’s the underlying force that drives economic growth and expansion. Without demand, no business would ever bother producing anything.

So, many view demand as the basis for driving business and/or the price of any asset. But, again, what drives demand? Is that not the most important question to ask in order to determine at what level an asset should be priced?

Click here to read the full story on Iris.xyz.

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