Supply factors: There are about 137,400 tons of gold on the ground in the world, and the stock of gold on the ground is still growing at a rate of about 2% every year.
Annual supply and demand: The annual supply and demand of gold is approximately 4,200 tons, and the newly produced gold each year accounts for 62% of the annual supply. New gold mining costs: The average total cost of gold mining is approximately just under $260 per ounce. Due to advances in mining technology, gold development costs have continued to decrease over the past 20 years.
Political, military and economic changes in gold-producing countries: Any political or military turmoil in gold-producing countries will undoubtedly directly affect the amount of gold produced in that country, and thus affect the world's gold supply.
The central bank’s gold selling: The central bank holds the largest amount of gold in the world. 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. Therefore, in the past 30 years, the central bank's gold reserves have declined greatly in both absolute and relative quantities. The decline in quantity is mainly due to the sale of gold reserves in the gold market.
Demand factors: The demand for gold is directly related to the use of gold: changes in the actual demand for gold (jewelry 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 widely used as a protective layer. In fields such as medicine and architectural decoration, although technological advancements have led to the continuous emergence of gold substitutes, the demand for gold is still on the rise due to its special metallic properties. In some areas, 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 been greatly reduced since 1997. According to data from the World Gold Council, gold demand in Thailand, Indonesia, Malaysia and South Korea has dropped by 71% respectively. %, 28%, 10% and 9%.
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, gold prices rise as demand for gold rises due to its relative insurance against monetary assets. For example: During the three U.S. dollar crises after World War II, due to the serious U.S. balance of payments deficit trend, the U.S. dollars held by various countries increased significantly. The market's confidence in the value of the U.S. dollar was shaken, and 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.
Speculative demand: Speculators take advantage of the gold price fluctuations in the gold market and the trading system of the gold futures market to buy and sell gold in large quantities based on international and domestic situations, 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, selling it in the spot gold market, and building a large number of short positions on the gold futures exchange. When gold prices fell to a 20-year low in July 1999, data released by the U.S. Commodity Futures Trading Commission showed that speculative short positions on gold futures exchanges were close to 9 million ounces. 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 gold price rebounded slightly, the hedging forward selling from manufacturers suppressed the gold price from rising further. At the same time, fund companies obtained new opportunities to re-establish short selling positions, forming a falling pattern of gold prices falling lower than the previous wave at that time. .
Other factors: The impact of the U.S. dollar exchange rate. The U.S. dollar exchange rate is one of the important factors affecting gold price fluctuations. Usually in the gold market, there is a rule that when the U.S. dollar rises, the price of gold falls; when the U.S. dollar falls, the price of gold rises. If the U.S. dollar is strong, it generally means that the U.S. domestic economy is in good shape. 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. When the U.S. dollar exchange rate declines, it is often related to inflation, stock market downturns, etc. , the value-preserving function of gold is once again reflected and the price of gold rises. 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, the price of gold rose to its highest level in history in early 1980, exceeding $800 per ounce.
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