If we want to say what the basic price of international gold is, it should be based on the Bretton Woods system established by the United States after World War II, with the US dollar as the most important international reserve currency.
The dollar is directly linked to gold, the currencies of all countries are linked to the dollar, and gold can be exchanged with the United States at the official price of $35 per ounce. Under the Bretton Woods system, the convertibility of the US dollar against gold and the adjustable pegged exchange rate system are the two pillars of this monetary system, and the International Monetary Fund is the central institution to maintain the normal operation of this system, with three functions: monitoring the international exchange rate, providing international credit and coordinating international monetary relations. Later, the system came to an end in 1973 due to the frequent outbreak of the US dollar crisis and the US economic crisis, as well as the inevitable contradiction of the system itself.
First, the gold market price.
Market prices include spot and futures prices. These two prices are both related and different. These two prices are influenced by many factors, such as the relationship between supply and demand and the interference of gold price, which change greatly and the price determination mechanism is very complicated. What is important is that spot prices and futures prices are affected by similar factors, so the direction and magnitude of changes are basically the same. However, due to the convergence of market trends, the basis of gold (that is, the difference between the spot price of gold and the futures price) will continue to decrease as the futures delivery date approaches. At the delivery date, the futures price and spot price of the transaction are roughly equal. Theoretically, the futures price should stably reflect the spot price plus the holding cost of a specific delivery period.
Therefore, the gold futures price should be higher than the spot price, and the basis is negative. However, the factors that determine the spot price and futures price are complicated, such as the short-term and long-term supply of gold, including the annual output of gold, and the selling of gold reserves by central banks. Market demand of gold, including changes in actual demand of gold (jewelry industry, industry, etc.). ), gold recycling, etc. The stability of political situation in the world and other countries, the level of inflation, interest rates and some unexpected events are all important factors affecting investors' psychology, which in turn affects the trend of gold prices; Speculators use gold price fluctuations and unexpected events to speculate, and various hedge funds enter the market to make waves, artificially creating the illusion of supply and demand. All these will make the relationship between gold supply and demand in the world gold market unbalanced, and the relationship between spot price and futures price distorted. At this time, due to the shortage of gold, the cost of holding futures can not be compensated, or even the basis is positive, making the spot price higher than the futures price.
With the establishment of Hong Kong gold market and other gold markets, the world gold market has become a continuous whole, trading 24 hours a day. Due to the above factors, the price of gold in the world market often fluctuates violently. Only the medium and long-term average price, because of various speculative factors, is a more objective reflection of the market price of gold affected by the relationship between supply and demand. For example, in the 45 gold auctions of the International Monetary Fund from 1976 to 1980, the average price was $228.56 per ounce, which was very close to the average price of the London gold pricing market in the same period.