What factors are affected by the rise in gold prices in this round, and what should be paid attention to in investment?
Today (22nd), the latest price of gold in London is around $2,370 per ounce, and the price of physical gold on the Shanghai Gold Exchange is around 560 yuan, down about 1% from the previous trading day. But despite this, the price of gold is still running at a high level. In fact, since March this year, the price of gold has not only hit new highs, but also broken many previous "conventions". What happened to gold?
From March 1 to April 19 this year, in just 35 trading days, this commodity rose by more than 14 percent, and the latest price rose by about 20 percent from the low point in February. This is the gold that makes people feel excited and frightened at the moment.
Wang Peng, Chief Macro Analyst of Galaxy Futures: In two words, I want to be a new high and strong.
Xu Zhiyan, fund manager of Huaan Fund Gold ETF: This round of reaction is more violent, if we use a word, we call it a new cycle of gold.
When it comes to the price of gold, it usually refers to the London spot gold price. In Beijing, the reporter found Wang Peng, the chief macro analyst of Galaxy Futures, who had just completed an analysis report. According to the report, in the 56 years since 1968, the price of gold in London has risen 66 times.
As can be seen from this chart, there have been two significant increases in the price of gold over a period of about 10 years, from 1968 to 1980 and from 2001 to 2012. In the middle of the two rises, there was a period of shock that lasted for about 20 years. After the second rally, from 2013 to 2020, the price of gold fell sharply and then rebounded, and so far in 2021, especially since the beginning of this year, the gold price has begun to hit new highs repeatedly. Wang Peng believes that 2008 is a key year in the second round of the upward cycle, and the price of gold at that time has similar characteristics to the situation this year.
Wang Peng, Chief Macro Analyst of Galaxy Futures: After the 2008 financial crisis, gold prices trended, and in 2011, gold prices were a high point in the last round of gold price increases. Compared with this round, both rounds of gold price increases have obvious characteristics of the post-crisis era.
This round of gold rally is significantly different from previous times
In Beijing's East Third Ring Road, reporters met with Wang Lixin, CEO of the World Gold Council in China, and in their newly released March gold market commentary, there was no shortage of words such as "unexpected" and "unprecedented".
Wang Lixin, Chief Executive Officer, World Gold Council China: Generally speaking, when we say that the US dollar is strong, the gold price is relatively weak, which is a negative correlation. But this time there was also a rallying relationship, the dollar did not weaken, and the price of gold also strengthened. This phenomenon is quite special.
Who is the "driving force" of this round of gold price increases?
What are the factors that have led to the rapid rise in gold prices this round?
Expectations of a rate cut by the US dollar
Xu Zhiyan manages the largest gold ETF product in China and the largest in Asia. The so-called gold ETF is actually an alternative form of investing in physical gold, which corresponds to the physical gold of the Shanghai Gold Exchange. Now, they have around 40 tonnes of physical gold under management. In his view, the reason behind the current round of gold prices rising in tandem with the US dollar and US bonds is the expectation of US interest rate cuts.
Xu Zhiyan, fund manager of Huaan Fund Gold ETF: The Federal Reserve, although we see that the expectation of interest rate cuts has been repeated, in the medium and long term, especially in the medium term, interest rate cuts are still almost certain, because its economic growth is relatively weak, and such high interest rates are difficult to maintain.
Wang Lixin, Chief Executive Officer, World Gold Council China: What everyone expects is that the Fed will cut interest rates, and generally speaking, if it does, it will be a strong factor supporting gold prices.
The question of whether the interest rate on the dollar will fall or not, after all, the US economic data has changed frequently, and the timing of the Fed's announcement of interest rate cuts has been repeatedly postponed. However, the existence of this expectation still affects the trend of gold prices.
U.S. currency is over-issued
The impact of the US dollar on gold is not only interest rate cuts, but also currency over-issuance.
Zhu Bin, Chief Economist of South China Futures: The global currency over-issuance, especially in 2008, the United States engaged in a round of currency over-issuance in order to save the economy. In 2020, the United States engaged in another wave of currency over-issuance, which led to the rise of gold.
And what is the relationship between the over-issuance of US dollar currencies and the rise in gold prices?
Zhu Bin, chief economist of South China Futures: The real purchasing power of the dollar is declining due to a large number of issuances, and now the world is over-issued in addition to the United States, including the European Central Bank, including the Bank of Japan, so the purchasing power of global credit currencies is declining, which highlights the value of gold as a core asset, so the price of gold is rising.
The factors behind the rise in gold prices are complex
The rise in gold prices is not only related to the over-issuance of US currency, but also many comprehensive factors that have contributed to the rise in gold prices.
Factor 1: Gold is naturally scarce
In the eyes of the market, gold itself, as a scarce resource, has financial and commodity attributes.
Xu Zhiyan, fund manager of Huaan Fund Gold ETF: In the past ten years, about 3,500 to 3,600 tons of gold have been dug out of the ground, and 800 to 900 tons of second-hand gold, which adds up to less than 5,000 tons, and the new proven reserves have not increased significantly in the past 40 years. According to official data, in 15 to 20 years, gold may be mined. So the tight balance between supply and demand for gold, and its scarcity, is very certain.
Comprehensive factor 2: Uncertainty factors increase and risk aversion rises
Scarcity alone is certainly not enough to explain the rise in the price of gold. In the interview, the reporter found that industry insiders generally believe that some uncertainties in the world have also directly affected the market's demand for gold.
Xu Zhiyan, fund manager of Huaan Fund Gold ETF: Global geopolitical conflicts.
Wang Lixin, Chief Executive Officer, World Gold Council China: There are some major regional events that have not weakened or decreased, but have increased in intensity, and this impact is also a major factor supporting the rise in gold prices.
Not only that, but the World Gold Council's analysis found that there was strong demand for retail gold investment.
Wang Lixin, Chief Executive Officer, World Gold Council China: Explain that investors are worried about this strong uncertainty that is emerging in this market as a whole. There is also a possibility that society is in the midst of a process of great change, so this uncertainty has also caused consumers or investors to use gold as a traditional anti-risk role, which is the same around the world.
Factor 3: Central banks continue to buy gold
It's the same all over the world, but the main force of gold buying has always been not retail, but central banks. The data shows that the current round of gold rise is inseparable from the promotion of gold purchases by central banks.
Wang Peng, Chief Macro Analyst of Galaxy Futures: Since 2011, central banks of various countries have begun to gradually buy gold, and the scale of global central bank gold purchases will reach 1,081 tons in 2022 and 1,037 tons in 2023.
It is under the combined effect of a series of factors that gold has become a "golden doll" in the eyes of global investors.
Wang Lixin, Chief Executive Officer, World Gold Council China: In the London spot market and the NYSE futures market, in March, the buyers in these two markets were very large, and there may be more buyers at the price of $2,100 an ounce, and even before the price rises, there has been a large-scale buyer's market, so the potential energy will be superimposed to amplify the rise in gold prices.
Expert: Gold is not a short-term investment
The price of gold rose surprisingly, and the reporter found in the interview that industry insiders generally suggested that gold is not a short-term investment variety.
Zhu Bin, Chief Economist of Nanhua Futures: Gold is not a short-term operation variety, it is more suitable for long-term holding.
Xu Zhiyan, fund manager of Huaan Fund Gold ETF: In the short term, I think investors should not blindly chase high, because the market is a market after all, since it has risen, it has adjusted, and gold itself is not a variety that has been rising.
Wang Peng, chief macro analyst of Galaxy Futures: Gold prices have been at a historical high, we still don't blindly chase high gold prices, now the factors affecting the price of gold are becoming more and more complex, and it is no longer possible to infer the rise and fall of gold from the trend of the dollar, the trend of U.S. bonds, and other simple factors.
Wang Lixin, Chief Executive Officer, World Gold Council China: Don't jump into the market just because the price of gold has risen so fast now. In addition, you don't have to be so entangled when you buy gold, don't pay attention to whether the price of gold rises all the time, and then you will be restless if it falls a little. We have found that people who make money investing in gold tend to be long-term holders.
(CCTV reporter Shi Sining, Wang Nan, Zhang Jun, Zhejiang Station)