Main factors affecting world gold prices
1. Supply factors:
The main supply-side factors are:
(1) Above ground
There are currently approximately 137,400
tons of gold in the world, and the stock of gold on the ground is still growing at a rate of about 2%
every year.
(2) Annual supply and demand
The annual supply and demand of gold is approximately 4,200
tons, and the newly produced gold every year accounts for 62% of the annual supply.
(3) New gold mining costs
The average total cost of gold mining is approximately slightly less than 260
US dollars per ounce. Gold development costs have continued to fall over the past
20 years due to advances in mining technology.
(4) Political, military and economic changes in gold-producing countries
Any political or military turmoil in these countries will undoubtedly directly affect the amount of gold produced in that country, and then Affects world gold supply.
(5) Central Bank’s Gold Selling
The Central Bank is the largest holder of gold in the world. In 1969
the official gold reserve was 36,458
tons, accounting for 42.6% of the total surface gold stock at that time, and by 1998
the official gold reserve was approximately 34,000
tons, accounting for 10% of the total gold stock that has been mined 24.1%
. At current production capacity, this is equivalent to 13 years of world gold mine production. As the main use of gold has gradually changed from an important reserve asset to a metal raw material for the production of jewelry, either to improve the country's international balance of payments or to suppress international gold prices,
30
years The central bank's gold reserves have declined significantly both in absolute and relative terms. The decline in quantity is mainly due to the sale of gold reserves in the gold market. For example, the massive sell-off by the Bank of England and the preparations of the Swiss National Bank and the International Monetary Fund to reduce gold reserves have become the main reasons for the recent decline in gold prices in the international gold market.
2. Demand factors:
The demand for gold is directly related to the use of gold.
(1) Changes in actual demand for gold (jewellery industry, industry, etc.).
Generally speaking, the development speed of the world economy determines the total demand for gold. For example, in the field of microelectronics, gold is increasingly used as a protective layer; in fields such as medicine and architectural decoration, although technology The progress of the times has led to the continuous emergence of gold substitutes, but the demand for gold is still on the rise due to its special metallic properties.
In some regions, local factors have a significant impact on gold demand. For example, India and Southeast Asian countries, which have always had a large demand for gold jewelry, have been affected by the financial crisis. Gold imports have decreased significantly since 1997. According to data from the World Gold Council, Thailand Gold demand in , Indonesia, Malaysia and South Korea fell by 71%, 28%, 10% and 9% respectively.
(2) The need for value preservation.
Gold reserves have always been used by the central bank as an important means to prevent domestic inflation and regulate the market. For ordinary investors, investing in gold is mainly to achieve the purpose of preserving value under inflation. In an economic downturn, as gold provides insurance relative to monetary assets, the demand for gold rises and the price of gold rises. For example: In the three U.S. dollar crises after World War II, due to the serious balance of payments deficit trend of the United States, the U.S. dollars held by various countries increased significantly. The market's confidence in the value of the U.S. dollar was shaken. Investors rushed to buy gold in large quantities, which directly led to the bankruptcy of the Bretton Woods system. .
In 1987
Due to the depreciation of the US dollar, the increase in the US deficit, and the unstable situation in the Middle East, the international gold price rose sharply.
(3) Speculative demand.
Speculators take advantage of the fluctuations in gold prices in the gold market and the trading system of the gold futures market to "short sell" or "replenish" gold in large quantities based on the international and domestic situation, artificially creating the illusion of gold demand. . In the gold market, almost every major decline is related to hedge fund companies borrowing short-term gold to sell in the spot gold market and building large short positions on the COMEX gold futures exchange. When the price of gold fell to a 20-year low in July 1999, data released by the U.S. Commodity Futures Trading Commission (CFTC) showed that COMEX speculative short positions are close to 9 million ounces (nearly 300 tons).
When a large number of stop-loss selling orders were triggered, the price of gold fell, and fund companies took the opportunity to cover profits. When the price of gold rebounded slightly, the hedging forward selling orders from manufacturers suppressed the further rise in gold prices, and at the same time provided funds to fund companies. New opportunities were used to re-establish short selling positions, forming a downward trend in gold prices at that time.
3. Other factors:
(l) The impact of the US dollar exchange rate.
The U.S. dollar exchange rate is also one of the important factors affecting gold price fluctuations. Generally speaking, in the gold market, if the US dollar rises, the price of gold will fall; if the US dollar falls, the price of gold will rise. A strong U.S. dollar generally represents a good domestic economic situation in the United States. U.S. domestic stocks and bonds will be eagerly sought after by investors, and the function of gold as a store of value will be weakened; while a decline in the U.S. dollar exchange rate is often related to inflation, a downturn in the stock market, etc., gold's value preservation Functionality is demonstrated again. This is because the depreciation of the U.S. dollar is often related to inflation, and the value of gold is relatively high. When the U.S. dollar depreciates and inflation intensifies, it will often stimulate an increase in the value preservation and speculative demand for gold.
In August 1971 and February 1973
The U.S. government twice announced the devaluation of the U.S. dollar. Under the influence of factors such as the sharp decline in the U.S. dollar exchange rate and inflation,
In early 1980, the price of gold rose to its highest level in history, exceeding 800 US dollars per ounce. Looking back at the history of the past 20 years, if the US dollar is strong against other Western currencies, the price of gold will fall in the international market. If the US dollar depreciates slightly, the price of gold will gradually rise.
(2) The monetary policies of various countries are closely related to the international gold price.
When a country adopts a loose monetary policy, due to the decline in interest rates, the country's money supply increases, increasing the possibility of inflation, which will cause the price of gold to rise. For example, in the 1960s, the low interest rate policy of the United States prompted domestic capital outflows, and a large amount of U.S. dollars flowed into Europe and Japan. As the net positions of U.S. dollars held by various countries increased, they became worried about the value of the U.S. dollar. , so they began to sell dollars in the international market and snap up gold, which eventually led to the disintegration of the Bretton Woods system. However, after
1979, the impact of interest rate factors on gold prices has gradually weakened.
For example, the Federal Reserve’s eleven interest rate cuts this year did not have a very big impact on the gold market. Only in the "9.11" incident did the gold market benefit.
(3) The impact of inflation on gold prices.
This requires long-term and short-term analysis, and it must be combined with the degree of inflation in the short term. In the long run, if the annual inflation rate changes within the normal range, it will have little impact on the fluctuation of gold prices; only in the short term, if prices rise sharply, causing people to panic, and the unit purchasing power of currency decreases, the price of gold will increase significantly. rise. Although after entering the 1990s, the world entered an era of low inflation, and the role of gold as a symbol of monetary stability has become increasingly smaller. And as a long-term investment tool, gold's yield is increasingly lower than securities such as bonds and stocks. However, in the long run, gold is still an important means of dealing with inflation.
(4) The impact of international trade, finance, and foreign debt deficits on gold prices.
Debt, a global problem, is no longer unique to developing countries. In the debt chain, not only are the debtor countries themselves unable to repay their debts, leading to economic stagnation, and economic stagnation further worsens the vicious cycle of debt, even creditor countries will face the risk of financial collapse due to the breakdown of relations with debtor countries. At this time, all countries will reserve large amounts of gold in order to protect their own economies from harm, causing the market price of gold to rise.
(5) International political turmoil, war, etc.
Major international political and war events will affect the price of gold. The government pays for wars or to maintain the stability of the domestic economy, and a large number of investors turn to gold for value-preserving investment. These will expand the demand for gold and stimulate the rise of gold prices. For example, World War II, the US-Vietnam War, the 1976 Thai coup, the 1986 "Iran-Contra" incident, etc., all caused the gold price to rise to varying degrees. For example, the terrorist organization's attack on the World Trade Center in the United States in September this year caused the price of gold to soar to the highest level of this year, nearly
$300.
(6) The impact of stock market conditions on gold prices.
Generally speaking, when the stock market falls, the price of gold rises. This mainly reflects investors' expectations for economic development prospects. If everyone is generally optimistic about the economic prospects, a large amount of funds will flow to the stock market, investment in the stock market will be enthusiastic, and the price of gold will fall.
In addition to the above-mentioned factors affecting gold prices, the intervention activities of international financial organizations and the policies and regulations of national and regional central financial institutions will also have a significant impact on changes in world gold prices.