The international gold price has risen by more than 12% this year, what factors need to be paid attention to when investing in gold?

Guo Shiliang

2024-05-06 09:45Published in Guangdong financial commentator, financial columnist

  From a long-term perspective, gold has an advantage against inflation. In the long run, investing in gold at any time will not set people up. From a short- and medium-term perspective, there are many factors that affect the price trend of gold, such as changes in the geopolitical situation, changes in investment sentiment and changes in the demand for risk control, etc., which will affect the fluctuation trend of gold prices.

  In practice, there are many ways to invest in gold. For example, investing in physical gold bars, investing in jewellery gold, investing in gold stocks, etc. However, we also need to consider factors such as gold purity, gold weight, and brand premium when investing.

  Generally speaking, investing in physical gold, physical gold bars are more cost-effective than jewelry gold and gold ornaments. Therefore, from an investment perspective, it may be easier to achieve the effect of asset preservation and appreciation by investing in gold bars with high purity and heavy weight. Jewelry gold is more inclined to be consumed, considering the process cost and brand premium factors, the value preservation effect of jewelry gold is not as good as that of physical gold bars.

  There is also a simple and effective way to invest in gold, which is to invest in Shanghai gold.

  Tianhong Shanghai Gold ETF (159830) tracks the target of Shanghai Gold, and by investing in related ETFs, you can indirectly share the investment results of investing in Shanghai Gold. From the perspective of more specific investment methods, investors can choose relevant investment varieties according to their personal risk appetite and investment needs, such as Tianhong Shanghai Gold ETF Initiation Connection A (014661) and Tianhong Shanghai Gold ETF Initiation Connection C (014662).

  Speaking of Shanghai Gold, investors may have heard of it before, but they are not particularly familiar with its concept and investment performance. Here, I will give you a specific analysis.

  First of all, we need to understand the concept of Shanghai Gold.

  Shanghai Gold is a pricing contract launched by the Shanghai Gold Exchange, and the physical delivery of Shanghai Gold is a gold ingot denominated in RMB, delivered in Shanghai, with a standard weight of 1 kg and a fineness of not less than 99.99%.

  In addition, let's take a look at the market performance of Shanghai Gold over the years. According to the data, since its release on April 19, 2016, as of December 31, 2013, its annualized return was as high as 8.46%. According to this annualized rate of return analysis, the annualized return of Shanghai Gold has outperformed the inflation level in the same period, and also outperformed the market performance of most A-share listed companies in the same period, which has relatively good investment value.

  From a long-term investment perspective, gold is still one of the preferred investment varieties to resist inflation. In anticipation of the Federal Reserve's interest rate cut, coupled with the intensification of demand for risk control caused by the heating up of the geopolitical situation, it has brought a certain support to the trend of gold prices. From a medium- to long-term perspective, the value preservation effect of gold will still be better than that of most investment varieties in the market during the same period.

  It is worth mentioning that in recent years, the amount of gold purchased by global central banks has continued to rise, and central bank gold reserves have gradually reached a historical high. It can be seen that in the eyes of global central banks, gold still has good investment value and is very well recognized globally.

  Looking back at the gold market trend in the last 50 years, the gold market has emerged from a bull market in 1972 to 1981, and the price of gold has climbed sharply from US$60 per ounce to US$850 in nine years.

  From 2001 to 2011, the gold market once again emerged from a bull market, this time climbing from $260 to $1,900, and the price of gold rose several times over the course of a decade, bringing a significant return on investment for long-term holders.

  Since 2018, the price of gold has risen from $1,200 to about $2,400, although the price of gold has doubled from the low, but from the perspective of the rising cycle, there is still a certain distance from the first two rounds of the gold bull market cycle, which means that the gold bull market will not end easily.

  In the first four months of this year, the Fed has been slow to take measures to cut interest rates, and the Fed's expectations for interest rate cuts in the first half of the year have been lowered again and again. However, the Fed has ended its cycle of raising interest rates, and it is only a matter of time before interest rates are cut. For the rest of 2024, there is still the possibility of the Fed cutting interest rates, and once the Fed starts the rate cutting cycle, it will have a lot of impact on gold prices.

  Historically, the long-term return of gold has been positive, and it has a low correlation with stocks and bonds. Therefore, from the perspective of long-term asset allocation, gold can be used as part of asset allocation. If investors choose a better investment time, then the excess yield brought by investing in gold is also worth looking forward to.

  Although gold can resist the impact of inflation in the long run, the volatility of gold prices is still relatively large, so it is also a medium and high-risk investment for gold. Against the backdrop of continued strength in the gold price, investing in gold still needs to be within our means.

Risk Warning: Investment is risky, please choose carefully. Past performance of a fund is not indicative of its future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of the performance of the new fund. Investors are advised to carefully read the Fund Contract, Prospectus, Key Facts Statement and relevant announcements to fully understand the risk characteristics of the Fund.

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