Gold rose sharply, and many people paid attention. I bought it three or four years ago, but it sold quickly, with a small investment and a small return, so I paid little attention. Unexpectedly, it has risen sharply recently. Because I pay attention to macro and geographic, I sometimes pay attention to gold, but I really don't want to make money from it.
At present, the domestic gold price is about 560 yuan/gram (spot gold jewelry, the price is almost 700 yuan/gram), and the international gold price is about 2370 US dollars/ounce.
In 2011, the international gold price was US$1,921 per ounce, in 2022, the lowest was US$1,634 per ounce, and at the beginning of 2024, it was around US$2,060 per ounce.
You can calculate for yourself how much the price of gold has risen since different periods of time.
Speaking of which, it's not much. It's just that in the last year, compared to the big A, or real estate, etc., it is much better. Globally, gold was the fourth largest asset class in terms of income last year.
In fact, since the beginning of this year, silver, copper, aluminum, lead and zinc and other non-ferrous metals are rising, such as silver, which has risen by 16% since the beginning of the year, exceeding the 15% increase in gold. The price of copper is even more exaggerated, nearly doubling since 2020.
This round of gold rises, some people start counting from October 2022, others from 2019 and 2020, and in February-March 2024, there is suddenly another wave of steep small peaks. Therefore, to explain this wave of gold rise, the time point of observation is basically placed before and after this.
The price of gold is not only related to personal investment income and security, but also closely related to the global situation, especially geopolitics, so it is a good window to observe the international situation, which is very noteworthy and interesting.
Let's talk about it. However, what I am going to say next is purely for small talk and learning, and is not for reference, so don't take it seriously.
01
—
The Triffin Puzzle
To understand this rally in gold, it is necessary to first briefly understand what gold is.
Gold, for a long time, was a symbol of human wealth. Because as a symbol of wealth, it is a global phenomenon, not limited to a certain country or culture, from ancient Greece, ancient Rome, ancient Egypt, ancient India, to ancient China, modern China, Europe and the United States.
Why is this so?
Scarcity, stability, easy decomposition, easy to carry, not easy to deteriorate, homogeneous, in short, has special physical properties. Marx's sentence is the most classic: "Gold and silver are not money by nature, and money is naturally gold and silver."
So if you look at the archaeology of the world, if you dig up the royal tombs of different civilizations, there will basically be gold. Take a look at the various treasure hunt adventure movies, no matter which country produced them, gold is the main event.
You can think of it as a consensus, a tacit understanding, or a custom, and a common custom that humans have formed in the absence of large-scale communication in their respective cultures.
It is also based on this common custom that gold has been one of the legal tenders of almost all civilizations for a long time.
Gold became legal tender as early as the 7th century BC, in Turkey next to the Mediterranean, and in China, a few centuries later.
To put it simply, it is a metal of about the same weight that is made with the credit of the government (the ancient technology is not good, and the shape and weight are often inconsistent), with logos and numbers on it, which can be used to buy things.
Later, with the exponential increase in the volume of global trade, gold became more and more inconvenient to use as legal tender, so it was slowly replaced by paper money.
Of course, there is a transitional phase in this, the gold standard proposed by Newton in the 18th century (during which many forms were changed, and the British dominated), and the Bretton Woods monetary system in 1944 (dominated by the United States), which is the pinnacle of gold's fiat currency function, and can also be seen as a transitional stage towards "pure credit banknotes".
Trading directly with gold ingots and gold coins is actually the earliest gold standard, called the classical gold standard.
But we now generally say that the gold standard, in order to facilitate transactions, based on gold, print out the corresponding amount of paper money system, how much paper money to print, depending on the amount of gold owned, is actually "gold banknotes", and the gold coin itself is not in circulation, sometimes melted into gold nuggets, locked into the state-designated safe, cellar, really needed, you can take money to exchange, of course, sometimes individuals can not redeem, sometimes rumors can not be redeemed, then there will be a crisis.
Why, then, did the gold standard, which was dominated by the United Kingdom, become the gold standard dominated by the United States?
To put it simply, these two countries used to be the world's industry and trade hegemons, with the most gold reserves, and other countries in order to facilitate international business, they reserve gold in their safes or cellars, and if they really need physical gold, they first take their own paper money, exchange it for pounds and dollars at a certain exchange rate, and then use these two currencies to go to their safes or cellars to take them out.
But now fiat money has been completely decoupled from gold, and has become a "pure credit banknote" after the collapse of the Bretton Woods monetary system in 1971 and the Jamaica agreement in 1976.
At this point, paper money has completely replaced the status of gold as a legal tender, and gold has been honorably "laid off" after assuming the monetary function for thousands of years.
However, whether it is the post-classical gold standard era or the current era of "credit paper money", there is one problem that has not been solved, which is what we often call the "Triffin problem".
Triffin is a Belgian-American economist. In 1960, he wrote a book called "The Gold and the Dollar Crisis: The Future of Free Convertibility", which proposed the "Triffin Problem", also known as the "Triffin Paradox".
In 1960, it was still in the era of the U.S.-dominated Bretton Woods monetary system, but the system was already very problematic.
At that time, the United States fought the Korean War, and then went to Vietnam to fight, the government became bigger and bigger, and the dollar was printed more and more, but the gold reserves did not increase.
The so-called Bretton Woods monetary system was originally discussed in 1944, and all the gold was stored in the cellars of the United States, and the currencies of other countries were exchanged for 1 ounce of gold at a fixed exchange rate of 35 US dollars, so the more US dollars were printed, it became a question of whether there was enough gold to exchange in the cellars of the United States.
The first person who felt that something would go wrong was Charles de Gaulle of France, who was so anxious that he jumped to his feet and personally drove a warship to transport dollars to the United States, so that the United States could exchange the gold that belonged to France.
Later, Germany and Italy followed suit, and there was actually a run on gold. So much so that by 1970, the gold reserves in the cellars of the United States were less than 10,000 tons, and at the peak there were 2-30,000 tons.
It was under these circumstances that in 1971 Nixon announced that the exchange of dollars for gold would be stopped, and the Bretton Woods monetary system collapsed.
So why is this a problem?
Triffin explained that the essence is that the Bretton Woods monetary system with the dollar as the core has irreconcilable bugs:
In this system, although the US dollar has achieved the status of the international core currency, other countries must first exchange their own currencies for US dollars before they can exchange gold, but this also means that the United States has to maintain a trade deficit and continue to export US dollars, so that overseas US dollars will accumulate more and more, and one day it will exceed the gold exchange capacity, and then the US dollar will depreciate and collapse, but the paradox is that if the United States does not run a deficit, then the US dollar will not be enough, international trade will not be able to do it, and the economy will shrink.
This is the "Triffin Problem".
The essence of the so-called "Triffin problem" is that both the Bretton Woods monetary system with the US dollar as the core and the gold standard with the British pound as the core rely too much on the currency of a sovereign country as the common currency for international trade.
So later, although the Bretton Woods monetary system was abolished, and the dollar was no longer pegged to gold, as long as the dollar was still the common currency of international trade, it would still face this "Triffin problem".
Like after the birth of the euro in 1999, there were similar problems, when it first appeared, it was very sought after, but the more sought after, the less valuable the euro became, so in 2000-2008, the euro was still on the rise, and it has not risen since then.
So, what do you do? Honestly, cold salad. So far, mankind has not found a monetary system that perfectly solves this dilemma.
After the collapse of the Bretton Woods monetary system, gold was no longer anchored to the dollar, and at that time, the third Middle East war broke out, and economic crises broke out in major European and American countries, and oil, as the "blood of industry", suddenly became the core asset of international trade, just like Kissinger said at that time: "Whoever controls oil controls all countries." ”
The United States was the dominant player in the world situation at that time, and after realizing the key position of oil, it quickly found Saudi Arabia and signed an agreement to bind oil to the US dollar, and then other countries joined one after another, so that the "petrodollar" was born, and the US dollar also continued to maintain the status of a common currency for international trade.
But if you change the soup and not the medicine, the "Triffin problem" still exists. So historically, the depreciation trend of the dollar has not changed since the problems of the Bretton Woods monetary system in the 60s of the last century.
During this period, from 1980 to the end of the 1990s, the United States pursued neoliberalism, reduced government fiscal intervention, tightened finances, and encountered the collapse and stagnation of rivals in the Clinton era, the Soviet Union and Japan, plus the Internet information revolution, the trade deficit eased, and the dollar was relatively stable.
In addition, the rest of the time, the dollar is in a depreciation cycle, and its attractiveness is becoming less and less. Roughly speaking, since the end of the 60s of the last century, the dollar has experienced three cycles of depreciation:
01) From 1968 to 1979, the Vietnam War, the collapse of the Bretton Woods system, and two oil crises;
02) From 2000 to 2012, the Internet bubble burst, 911, the European debt crisis, subprime mortgage, financial crisis;
03) From 2019 to the present, the pandemic, the Russia-Ukraine conflict, and the war in the Middle East.
The consequences of the depreciation of the US dollar are, first, the US debt getting higher and higher, the interest expense increasing, and second, the US dollar is also becoming less attractive as a foreign exchange reserve of various countries.
In 2001, the dollar accounted for 70% of central bank reserves, but in 2011 it fell to 60%, and now it has fallen to 58% – if it falls below 50%, the era of dollar reserve currencies is officially over.
Today's status of the dollar, on the one hand, comes from the strong economic, military, and political power of the United States, but on the other hand, everyone has to suffer, because there is no other better currency and asset substitute.
Interestingly, one thing that almost overlaps with the dollar's depreciation cycle is that the price of gold, once the world's currency, has been rising. One falls and one rises, and the two are highly overlapped.
From 1980 to the end of the 1990s, the dollar maintained a relatively stable cycle, and it was also during this period that gold had a long period of "sideways", but the overall trend was constantly rising:
01) From 1971 to September 1980, the price of gold rose from US$40.65 per ounce to US$666.75 per ounce, an increase of 1540%;
02) From September 1999 to August 2011, the price of gold rose from US$257.7 per ounce to US$1813.5 per ounce, an increase of 603%;
03) Since 2019 (some have been counted since 2020 or 2022), the price of gold has risen from $1,514.7 per ounce to around $2,370 per ounce, an increase of about 56%.
So the question arises, why does gold's upward cycle almost overlap with the dollar's depreciation cycle?
Most people who buy gold today should know that the dollar index is negatively correlated with the price of gold most of the time. But the question is, why?
The U.S. dollar and gold are both relatively safe assets, so many people think that the reason why the U.S. dollar index is negatively correlated with the price of gold is because the two are competitive, that is, if you choose the dollar, you will not choose gold, and if you choose gold, you will not choose the dollar.
In the past, we always said "gold in troubled times, antiques in prosperous times". Many investors also know that the main function of gold is: hedging and anti-inflation.
For example, the recent round of gold rally seems to be very compatible with risk aversion, and the pandemic, Russia-Ukraine, the Middle East and anti-globalization have led to a trade recession, which is called a "chaos" word.
But in the era dominated by the dollar, the so-called "gold in troubled times" has an implicit meaning, when the dollar is chosen, it means that the era of peace and prosperity, and the dollar is peace.
But is this the truth? Is it possible that the dollar itself is a source of chaos?
If we look at the history of the "demonetization" of gold in 1971 as a whole, we will see it clearly:
The core of the rise in gold prices is not because of the turmoil in Russia and Ukraine, the Middle East or North Africa, nor natural disasters such as pandemics and earthquakes, or the economic and financial crisis cycle, but the depreciation of the US dollar, and behind it is the "Triffin problem", which is determined by the inherent bug of the international monetary system with a single sovereign national currency as the core for a long time.
Geopolitical conflicts, pandemics and financial crises are only the key events that have prompted the indiscriminate issuance of the US dollar and the rapid depreciation in the short term, but the inherent contradictions of the long-term depreciation of the US dollar are the root causes of the rise in gold prices.
In fact, although gold, as a legal tender, was officially "laid off" in 1971, thousands of customs determined the value of gold as an invisible currency.
02
—
Central-hsien
Warren Buffett, the god of stocks, is said to have bought silver and oil, but he has never touched gold. His philosophy is:
If you pile up all the gold mined in the world, it's just a small piece of metal, and at the current price, even if you can buy all the land in the United States, plus 10 ExxonMobil and a trillion dollars, but the two are compared, "Which one are you willing to choose? Who can produce more value?"
It should be said that what Buffett said is indeed true.
At present, the total amount of gold available in the world is only 201,300 tons. And more than half of it is jewelry.
For thousands of years, gold served as legal tender, and that was before the major civilizations exchanged money on a large scale. The fundamental reason is that the physical properties of gold are relatively special, which we have mentioned earlier.
The key point is that even as mankind enters the era of industrialization, gold mining and smelting technology has made rapid progress, and the physical properties of gold as legal tender have not changed much.
In the mid-19th century, gold production increased dramatically around the world, such as Russia, the United States, Australia and South Africa, due to advances in mining technology.
It is said that 91% of the world's gold has been produced since 1900, but since then, the value of gold has been maintained because the volume of world trade has increased dramatically, the economy has expanded rapidly, and the demand for gold has also risen.
It's like, in the past, you had a bucket of water, which was enough for you to water a vegetable patch, but now you have 10 buckets of water, but your land has also expanded by 10, and the price of water is basically stable.
In fact, the current annual production of gold is still slightly lower than the demand for gold, and needs to be replenished by recycling.
According to scientists' estimates, the total amount of gold on the entire earth is 400 million tons, which is not rare, accounting for 150,000 parts of the earth's weight, but due to human exploration and smelting technology and cost constraints, there is only so much gold on the ground, and it has not skyrocketed.
The main supply of gold comes from mines, accounting for about 75%, and almost 3,300 tons of new gold are added every year, that is, about 1.8% per year, and this value is very rigid, and if it is insufficient, it is supplemented by recycled gold.
Therefore, on the whole, the supply and demand of gold are very stable, and it is difficult for the price to be affected by the changes in the supply and demand of the new total amount. Just look at the following two supply and demand tables:
It is precisely because the supply and demand of gold are relatively stable that gold has not lost its monetary value since ancient times, although it has now been "laid off".
- Any currency, the essence is the "ruler" of goods, if the "ruler" will be long and short, or as much as sand flooding, it will naturally not be easy to use, the "ruler" of gold, because the supply and demand are stable, the length of a stable batch, or in other words, its length growth can be predicted, so it is easy to use.
In other words, the price of gold that we see today is not primarily due to the overall supply and demand of gold, nor is it due to the fact that it suddenly becomes a material that is particularly in demand in some industry.
Taking this round of rise as an example, if you look at the holdings of the world's largest gold ETFs, such as DPDR, as well as physical consumption, such as the sales volume of Chow Tai Fook, it is not necessarily related to the current rise in gold prices.
Taking DPDR as an example, gold holdings were still 980 tons at the beginning of 2022, and have been declining since then, and now they are only about 830 tons.
Generally speaking, the demand for gold comes from four main sources: jewellery manufacturing, the technology industry, investment and central bank purchases.
If we look at the gold demand chart, we can roughly understand that there has been no major change in the overall supply and demand of gold, and there has been no major change in the investment demand of jewelry manufacturing, the technology industry and similar ETFs.
In addition, some technology companies like Silicon Valley will also buy gold as a hedge. But in the past few years, they seem to have bought bitcoin, so much so that the price of this thing has risen 4 times, much higher than the increase of gold.
However, if we take a closer look at the above demand data chart, the only prominent change in the past ten years is that in 2022 and 2023, the central bank's holdings of gold will suddenly double.
In the case of China's central bank, as of the end of March, our gold reserves had reached 72.72 million ounces, a record 17th consecutive month since October 2022.
As of 2023, central banks bought 1,037.4t of gold, accounting for 21.2% of gold demand.
In addition to China, like Russia, India, Poland, Singapore, Libya, Iraq...... and other central banks are increasing their holdings.
Poland added 130t to 358.7t last year, or 12.4% of its international reserves – a somewhat staggering figure that, in general, only accounts for around 3% of international reserves, as in China, 3.4%.
If we extend the time, we will find that in the past decade or so, the overall demand for gold by global central banks has been net purchases, averaging 400 tonnes per year, but in 2022, this figure suddenly soared to 1,136 tonnes, compared to 1,037 tonnes last year.
From 2009 to 2022, global central bank gold reserves rose by 22.2%.
So, which central banks are buying?
If you look at the table below, in the last decade or so, China, Russia and India, which are emerging trading powers, are the largest buyers of gold, while the United States, Japan and Europe are net sellers of gold, or remain unchanged.
From 2009 to 2022, Russia, China, India, Turkey and Kazakhstan accounted for 74.1% of the gold holdings.
Speaking of which, you get the idea, right?
The three rounds of gold price increases, including this round of gold price increases, have essentially been triggered by the depreciation of the US dollar – which has prompted the world's major central banks, especially those that may be sanctioned by the United States, or countries with active international trade and too many US dollars in reserve, to buy gold in large quantities in order to avoid the risk of depreciation under the dollar's "Triffin paradox".
The rise in gold in 1971, just after the collapse of the Bretton Woods monetary system, was also triggered by the frenzied stockpiling of gold by major central banks, but at that time, it was triggered by the countries most closely linked to the monetary system, Britain, France and Italy.
03
—
future
There is a risk of depreciation of the US dollar, especially when disasters, turbulence, and crises come, the Federal Reserve tends to release water, so the depreciation is even more severe, so it prompts the world's major central banks to reserve more gold, and then promotes the price of gold to rise.
But there is a question, as we said earlier, that is, the reason why gold is reserved by the central bank is also due to the fact that the currency value of gold itself has not been lost, so is there a possibility:
In the future, will we use gold to completely replace the dollar, or rather, return to the gold standard?
Let's start with the answer, impossible.
In fact, to put it bluntly, the major central banks reserve gold, which itself is caused by certain cultural customs, that is, the whole world seems to like gold very much.
But the paradox is that there is a paradox opposite to the "Triffin paradox", which is that people like gold precisely because it is scarce, and the reason why it has come down from the "post" of fiat currency is precisely because there is too little gold to be able to handle the ever-increasing international trade.
As we mentioned earlier, China, which is now the most active in international trade, has been increasing its holdings of gold in recent years, but its total foreign exchange reserves account for 3.4% of the total.
In most countries, the average gold foreign exchange reserve is around this figure.
Moreover, gold holdings in emerging market countries are growing, but they still do not account for a large proportion. The central banks of developed countries such as the United States, Germany, Italy, France, the United States, the European Central Bank, the IMF, Switzerland and Japan hold 3/4 of the world's gold reserves.
The main reason is that they used to be the main participants in the gold standard, and they stockpiled a lot of gold, which was later sold, but they still accounted for the lion's share, like the United States, which held more than 8,000 tons, which is four times as much as ours.
As I said earlier, there are currently 201,300 tonnes of gold in the world, and more than half of that is jewellery.
And our current global foreign exchange is 11 trillion US dollars, so even at the maximum volume of 200,000 tons, at the current highest price, the total value of the entire foreign exchange is 15%.
In short, the amount of gold is too small to replace the dollar, and we can't go back to the era when gold was anchored or legal tender, because today's international trade volume is not an order of magnitude at all compared with the past.
Therefore, the depreciation of the US dollar will trigger a rise in the price of gold, but the increase in gold will have little impact on the dollar index.
At present, the world's major central banks still have the largest dollar reserves.
Like China, which accounts for about 70% of its dollar asset reserves, including U.S. bonds. Of course, in recent years, the proportion of US dollar reserves has indeed been declining.
As we mentioned earlier, since 1999, the global central bank's reserves of dollar assets have fallen from 71% to 60% in 2011 and then to about 58% now.
However, it is important to understand that the biggest factor affecting dollar reserves is not gold, or even crises like Russia-Ukraine, the pandemic, or the financial tsunami - in such a situation, the dollar will tend to be indiscriminate, but the whole world will have to suffer, and there is no way.
If we look at the data, we will know that in 2021, the dollar reserves held by global central banks will be 59.15%, and after a round of Russia-Ukraine war, the pandemic, and the US dollar, it will only decline slightly to 58.36%.
So it is an objective fact that the dollar has not declined because of geopolitical, economic crises. The data is here, and it can't fool people.
Between 1999 and 2011, when dollar reserves fell the most, by about 10 percentage points, many people thought that the world would finally get rid of the dollar, but now it seems that the main reason is the competition of the euro, which was born in 1999. However, the euro was a bit uncompetitive and did not rise again after rising for a while, so the dollar still dominated.
If the dollar is to really decline, in addition to its abuse to dig its own grave, it may also need to have a strong sovereign currency that can be replaced, otherwise, it can only be endured.
Today, the renminbi is gaining momentum, but it is still too small. Global foreign exchange reserves are 58% for the US dollar, 20% for the euro, 5.7% for the Japanese yen, 4.8% for the British pound, 2.58% for the Canadian dollar, 2.29% for the Chinese yuan, and 2.11% for the Australian dollar.
There are many reasons for this, and we won't expand on them today.
But another interesting data is that the world's major central banks have been actively buying gold for more than a decade, and the global foreign exchange reserves have not risen much.
In China, for example, China's foreign exchange reserves, which have been declining since 3.83 trillion yuan in 2014, have remained between $3 trillion and $3.2 trillion in the past 10 years. (The growth of global foreign exchange reserves actually comes mainly from China, and if China does not grow, the world will not rise much.) ）
In contrast, in the past 10 years, although our foreign trade data as a whole is in an upward channel, the growth has also slowed down.
There are many fluctuations during the period, such as in the last two years, 42.07 trillion yuan in 2022, and the total amount of China's trade data in 2023 will be 41.76 trillion yuan, which has declined, and in addition, 2015, 2016, and 2019 are also in a downward channel.
In fact, since the 2008 U.S. financial crisis, global trade has undergone structural changes.
The core of the change is the US promotion of decoupling and breaking the chain, "small courtyard high walls" and "friendly shore outsourcing", and the EU's "de-risking" and local procurement measures, a small trend of "anti-globalization", surging from time to time.
This is the root cause of the fluctuation of China's foreign trade data in the past 10 years. Quite simply, Europe and the United States, which were in international trade, gradually felt that they had suffered a loss, and they no longer wanted to play the set of international trade game rules that they had set by themselves.
At present, this is a medium- to long-term trend in the process of globalization, and it will not change for a while and a half. This turbulent process is also a process of changing international trade rules - the rule-maker must be the most powerful actor under the rules, otherwise, there will be problems and cannot be avoided.
From the perspective of the monetary system, this is actually an externalized manifestation of the "Triffin paradox", and the United States cannot withstand the continuous depreciation of the US dollar and the long-term trade deficit.
So, what's going to happen next? To be honest, I don't know.
Based on past experience, a more pessimistic prediction is that a global inflation is coming.
The dollar is like water, in the early days of the pandemic, the United States implemented a new round of water release, which led to domestic inflation, in order to control inflation, the United States repeatedly raised interest rates and stopped the water in the bank, but now the dollar interest rate has reached 5.2%.
Goldman Sachs even recently predicted that the US interest rate would break through 8%. This is crazy, if that's the case, don't do it, add a little salt and cook it every day.
But the major central banks don't believe in such high interest rates, or the higher the interest rates, the more they don't believe it, which is the crux of the matter.
Especially in the past one or two months, gold has risen in a phenomenon that is very contrary to common sense: gold is rising again, and the dollar interest rate is also rising. We said that, in general, the two are negatively correlated.
After the release of the hot non-farm payrolls data and CPI rose by 3.5% in March, the market expects the Fed to cut interest rates further reduced, and it is said that there may be no interest rate cuts this year.
But on the day of the release of this data, gold opened slightly lower, and then quickly rose to a new historical record.
The simultaneous rise in US interest rates and the price of gold is an even more dangerous signal. This phenomenon has occurred in all past economic and financial crises.
The core reason is that the market is worried that the anti-inflation of the United States is out of control, and the dollar has been indiscriminately issued to the point that high interest rates cannot be stopped, and there may be a moment of systemic collapse or full-scale inflation, and the "black swan" is about to come out.
In March 2024, the U.S. fiscal spending, net interest expense, has ranked fourth, surpassing defense spending.
What is the need for this? Cutting interest rates, opening the floodgates, and the dollar rushing to the world?
In fact, at present, the water has rushed to the yen in addition to gold as a safe-haven. The yen, like gold, is recognized as a safe-haven asset.
But Japan is also raising interest rates, and the yen is currently depreciating rapidly, 10% from last year, and as of April 15, it fell to 153.80 yen per dollar, the lowest since June 1990.
In short, there are many signals now, which really make people feel very bad, the 2000 Internet bubble and the 2008 financial crisis, it seems that they are about to repeat themselves.
brief summary
Finally, let's talk about what to pay attention to when investing in gold.
In the past, we generally said that gold has the function of anti-general inflation in addition to hedging (anti-hyperinflation in essence). But as for the resistance to general inflation, many people do not admit it.
Because from the perspective of the long cycle of several decades, gold will indeed rise with inflation, but it often appears sideways for 10 or even 20 years, and the rising cycle is often short and rapid.
Life is limited, people only have one youth in their lives, and they can't get their wives if they don't have money in their pockets, so they must take out the investment money they bought gold, and if the price of gold is low relative to the price when they buy, it will be a loss.
So there was a news some time ago, the aunt who bought gold in 2013 will not be untied until 2024, to be honest, some of them may have been ancient, and they didn't wait for the day of unraveling.
In addition, buying gold, unlike depositing in the bank or buying stocks, will have interest or bonus income, anyway, buying it is just waiting for the next wave of rise. And during this period, if there is an explosion of technology stocks, if there is a unicorn listing, then the investment will be missed, which is the opportunity cost of buying gold.
Therefore, some people do not believe in gold's anti-inflation properties.
In addition, is there a chance for this wave of gold? I think there is still one.
But there is a problem, although gold is a hedging tool, but I think that the current gold is a hedging tool relative to the rapid depreciation of the US dollar, so if you simply look at the general geopolitical conflict, it may not be accurate.
For example, in the current Palestinian-Israeli conflict, some people speculate that the future direction of the new Iran-Israel conflict may have an impact on the price of gold. But I think maybe that's only part of the emotional impact. The reason, as I said earlier, is that except for the geopolitical conflicts in which the United States is deeply involved, and therefore the US dollar is printed, it generally does not prompt the world's major central banks to buy more gold - and since the 70s of the last century, the price of gold has risen because of the major central banks.
But the conflict between Russia and Ukraine is different, and the situation of the United States "weaponizing" the dollar and vigorously supporting Ukraine has a substantial impact on the central bank's purchase of gold. There is also the pandemic, and the old United States is crazy about printing dollars.
In short, unless there is a geopolitical conflict or a major crisis, only a real impact on the credit of the US dollar currency may trigger other central banks to buy gold, which in turn will lead to an increase in gold prices. Ordinary geopolitical conflicts and crises should not.
Moreover, some people believe that according to past experience, this wave of gold rises may also have a wave of correction. For example, at the height of the crisis in 2008, the price of gold plummeted from $1,000 an ounce to $680.
Why is this happening? Some people explain it from an emotional point of view. But I don't think so.
I'll give you an example. Just look at the Central Bank of Russia's gold purchases in 2022. As we all know, Russia was sanctioned by the United States back then, and part of its foreign exchange reserves, including gold, were frozen by the United States.
But you look at the Central Bank of Russia in 2022, instead of buying gold to hedge against risk, it sold part of it, which is the first time in nearly 18 years that it has been a net buyer of gold, because Russia has been a net buyer of gold since 2006.
The reason is simple, because it will be really difficult for Russia in 2022, and in the case of foreign exchange freezes, it is necessary to sell part of the gold in hand to make emergencies. Therefore, at the height of the crisis, it is possible to sell gold and ensure liquidity, so that there will be a correction in gold prices.
In addition, in 2023, Russia seems to be still selling gold reserves. Actually, isn't that what gold reserves do?