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Factors affecting the price of gold

Most of the reasons for the change in the price of gold are influenced by the supply and demand of gold itself. Therefore, as an investor with its own investment principle, it should be as far as possible to understand any factors affecting the supply of gold, so as to further understand the dynamics of other investors in the market and predict the trend of gold prices in order to achieve reasonable investment. purpose. The main factors include the following:

(1) US dollar trend

Although the dollar is not as stable as gold, it is much better than gold. Therefore, the dollar is considered the first type of money and gold is the second category. When the international political situation is not clear, people will buy gold because of the expected increase in gold prices. But the currency that most people keep in their hands is actually the US dollar. If the country needs to buy weapons or other supplies from other countries during the war, it will also hollow out the gold in its hands in exchange for dollars. Therefore, during the period of political instability, the dollar may not rise, but also depends on the trend of the dollar. To put it simply, the dollar is weaker than gold; the strong dollar is weak.

Usually, when an investor saves the capital, the gold will be given to the dollar, and the dollar will be given the gold. Although gold is not a legal currency, it always has its value and will not depreciate into scrap iron. If the US dollar is strong and the chances of investment in the US dollar increase, people will naturally chase the US dollar. Conversely, when the dollar is weaker in the foreign exchange market, the price of gold will be stronger.

(2) War and political turbulence

During the war and political turmoil, economic development will receive great restrictions. Any local currency is likely to depreciate due to inflation. At this time, the importance of gold has been fully exerted. Because of its recognized identity and the internationally recognized trading medium, people are turning their targets to gold at this moment. The snapping of gold will inevitably lead to an increase in the price of gold.

But there are other factors that are common constraints. For example, between the years 89 and 1992, there were many political turmoil and sporadic wars in the world, but the price of gold did not rise. The reason is that everyone holds the US dollar and discards gold. Therefore, investors should not mechanically apply war-torn factors to predict gold prices, but also consider other factors such as the US dollar.

(3) World financial crisis

If there is a bankruptcy of a world-class bank, what will happen to the price of gold?

In fact, this situation arises because of the emergence of the crisis. People naturally keep money in their hands, and banks will have a lot of runs or bankruptcies. The situation is like the Argentine economic crisis. The people of the country have to exchange dollars from the banks. The state has banned the exchange of dollars in order to retain the last investment opportunities. As a result, there has been constant riots and the country has fallen into panic.

When the financial system of the United States and other Western powers is unstable, world funds will be invested in gold, and gold demand will increase, and gold prices will rise. At this time, gold played the role of a financial refuge. Only when the financial system is stable, the confidence of investors in gold will be greatly reduced, and the gold price will fall.

(4) Inflation

We know that the purchasing power of a country's currency is determined based on the price index. When a country's prices are stable, the purchasing power of its currency becomes more stable. Conversely, the higher the currency rate, the weaker the purchasing power of the currency, and the less attractive the currency is. If the price index of the United States and major regions of the world remains stable, cash holdings will not depreciate, and interest income will inevitably become the first choice for investors.

On the contrary, if inflation is fierce, there is no guarantee of holding cash, and interest collection cannot keep up with the sharp rise in prices. People buy gold because the theoretical price of gold rises with inflation. The higher the inflation in the major western countries, the greater the demand for gold to maintain value, and the higher the world gold price. Among them, the inflation rate in the United States is the easiest to change the gold. In some smaller countries, such as Chile and Uruguay, the annual inflation rate can reach 400 times, but it has no effect on the price of gold.

(5) Oil price

Gold itself is a hedge under inflation and is inseparable from US inflation. Rising oil prices mean that inflation will follow and gold prices will rise.

(6) Local interest rate

Investing in gold will not earn interest, and the profit of its investment will rise by price. When the interest rate is low, under the measurement, investment in gold will have certain benefits; but when the interest rate rises, the interest rate will be more attractive, and the investment value of the non-interest gold will fall. Since the opportunity cost of gold investment is large, It would be better to place interest on the bank to be more stable and reliable. In particular, when interest rates in the United States rise, the dollar will be absorbed in large quantities, and the price of gold will be frustrated.

Interest rates are closely related to gold. If the interest rate in the country is high, it is necessary to consider whether it is worthwhile to lose interest income to buy gold.

(7) Economic situation

The economy is thriving, people's lives are worry-free, and naturally they will increase their desire to invest. The ability of folks to buy gold for value preservation or decoration will increase greatly, and gold prices will receive certain support. On the contrary, the people are not happy. During the economic depression, people can't even satisfy the basic guarantees of eating and dressing. Where else will there be interest in gold investment? The price of gold will inevitably fall. The economic situation is also a factor in the fluctuation of gold prices.

(8) Gold supply and demand relationship

The price of gold is based on the relationship between supply and demand. If the output of gold increases substantially, the price of gold will be affected and fall back. However, if there is a long-term strike by miners and other reasons, the output will stop increasing, and the price of gold will rise in the case of oversupply. In addition, the application of new gold mining technology and the discovery of new mines have all increased the supply of gold. Of course, the price will cause the price of gold to fall. A place may also have the habit of investing in gold, such as the gold investment boom in Japan, the demand has increased greatly, and it has also led to rising prices.

There are many aspects to the basic analysis of the trend of gold. When we are using these factors, we should consider how strong their respective roles are. Find the primary and secondary status and impact time period for each factor to make the best investment decisions.

The basic analysis of gold is divided into short-term (usually three-month) factors and long-term factors over time. We have to deal with their effects separately.