The soaring price of gold always makes people feel a little uneasy. In April this year, the price of gold hit an eight-year high, and also broke through the 700 yuan/gram mark in just a few days. For ordinary people, what is hidden behind this is the growth of wealth, which is more likely to be a precursor to a crisis.
The bustle of the gold market has almost become the focus of global investors, and the price tag of major gold brand stores has hovered above 690 yuan per gram at the beginning of the year. For example, the gold prices of Jin Supreme and Chaohongji are marked at 693 yuan/gram, and Lao Fengxiang is slightly lower, at 691 yuan/gram.
At the same time, on April 5, this figure jumped above the 700 yuan mark, and even in the international market, the price of gold touched an astonishing height of $2,880 per ounce. Such a price has not been seen in recent years. However, four days later, on April 9, there was a subtle change in the price of gold. It opened at $2,338.74 an ounce and closed slightly higher at $2,344.20 an ounce, an increase of just 0.23%. This short-lived stability did not reduce the tension in the market.
By April 13, the Chow Tai Fook gold store in Shanghai had quoted a higher price of 721 yuan per gram, which was significantly higher than at the beginning of the month. During the same period, platinum prices also showed a similar upward trend, with the price quoted at Chow Sang Sang's gold store reaching 376 yuan/gram on April 13.
Such a rise is a change in numbers. It reflects the deep concerns of global financial markets about the future of the economy. Rising infection numbers in the United States, escalating geopolitical tensions, and rising trade protectionism...... These headwinds have increased uncertainty in the market. The rise in the price of gold is like a warning about these risks.
In addition, the Federal Reserve and other major central banks have adopted more accommodative monetary policies in the face of the challenge of slowing economic growth, which has led to heightened inflation concerns in the market. Under the dual effects of low interest rates and large-scale quantitative easing, the money supply has exploded and the purchasing power of paper money has been weakened. As inflation expectations rise, gold, as a safe-haven asset for non-credit currencies, naturally becomes the preferred choice of investors, thus pushing its price further higher.
The rise in the price of gold has increased the volatility of financial markets and exacerbated the inequality in the distribution of wealth in society. Those who own gold assets have benefited from the rise in the gold price and have accumulated wealth rapidly, while those who do not have gold have experienced greater economic pressure due to the decline in purchasing power. This phenomenon was particularly pronounced during the financial crisis, when gold became one of the few tools that could withstand asset depreciation, which exacerbated the wealth gap in society and weakened the economic security of low- and middle-income households to some extent.
Against this backdrop, the value of gold is rising, and for the general population, this rise is not all good news. On the one hand, it does provide investors with a means of defending against inflation and market risk, and on the other hand, for those who do not enter the market in time, the high price of gold may also mean that the barrier to entry is getting higher and higher, and the purchasing power of ordinary households is eroded.
More notably, this heat in the gold market is likely due to investors' pessimistic expectations about the economic outlook. When more and more money flocks to gold as a safe haven, it actually reflects a lack of confidence in other investment channels. This phenomenon is known in economics as "safe-haven buying" and is often evident during periods of major economic uncertainty in the global or regional economy, or when political conflicts and natural disasters are frequent.
This concern for the future has also affected the retail market for gold. Gold sales have risen during the price spike, and a growing number of consumers say the high prices are putting them off. Especially in some large cities, the sales of gold jewellery have been affected to some extent, and many consumers have chosen to wait for prices to come down or switch to more affordable alternatives.
In addition, the rapid rise in the price of gold has also attracted the attention of governments and regulators. Some countries are beginning to consider whether they need to adjust their policies on gold trading and holding to prevent overheating of the market and excessive concentration of funds in a few assets such as gold. The likelihood of these policy changes further increases market uncertainty and makes gold investors and potential buyers need to be more cautious in analysing market trends and policy directions.