The price of gold, What is the reason behind the rise?

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In history, gold is actually a symbol of power and wealth. As a precious metal, gold has the most powerful function. Gold not only possesses ordinary commodity attributes, but also has financial attributes. In particular, it also possesses the attributes of currency. The martial arts high-strength gold has at least three functions: risk aversion, anti-inflation and investment, so the three major magicians wield magic wands to keep the price of gold rising.

Today I want to share with you the three magicians behind the rise in gold prices. Since the beginning of this year, gold has repeatedly hit a record high of $2,000 an ounce, becoming one of the most profitable investment products this year. Which magicians or wizards wield their magic wands to light up the gold and keep the price of gold rising?

The first magician is the epidemic. The new crown epidemic opened Pandora’s box and released at least four crises, a group of beasts.

The second magician is the Federal Reserve. The Federal Reserve has adopted an unlimited amount of loose monetary policy, and natural money printing has released the scourge of money.

The third magician is an international investor. In order to hedge or prevent inflation, these investors buy and buy. Buying not only spot gold, but also paper gold, releases the beast of demand.

The gold that the three major magicians wield their magic wands and lit up together made the price of gold hit new highs, so why would the magicians choose gold to perform their magic? In history, gold is actually a symbol of power and wealth. As a precious metal, gold has the most powerful function. Gold not only possesses ordinary commodity attributes, but also has financial attributes. In particular, it also possesses the attributes of currency. The martial arts high-strength gold has at least three functions: risk aversion, anti-inflation and investment, so the three major magicians wield magic wands to keep the price of gold rising.

The magician stuns the situation, taking turns to exert force. The first thing that flew over was the new crown epidemic. The new crown epidemic has brought about the crisis of the epidemic, the market crisis, and so on one after another. The negative interest rates, negative growth, and negative oil prices we talked about cannot stop this magician. On the contrary, it pushes up the price of gold. And international investors are like tigers going down the mountain, and they are eating gold on a carpet. Let’s take a look at how the three major magicians are finishing their eyes.

The first magician is the epidemic. The rare new crown epidemic opened Pandora’s box, unleashing various crises, and high emotions, triggering an increase in gold holdings and continuously rising gold prices. In history, we have reviewed several gold price surges that were actually caused by risk aversion, and they were all caused by crises.

Whether it was the oil crisis of the 1970s or the financial crisis of 2008. At that time, gold rose from dozens of dollars to 850 ounces in 1980. The 2008 financial crisis of this century also caused the price of gold to rise from less than 1,000 ounces to 1895 US dollars. The impact of this year’s epidemic has also pushed up the price of gold. The properties of gold have determined that everyone rushes to buy gold to avoid danger. The epidemic has released at least four major crises. These crises are intertwined and continuously push up the price of gold.

In the second quarter of the United States, we saw that his economic decline was as high as 32.9%, the biggest decline since the Great Depression. With the exception of China, this year’s global economic growth will enter a negative growth zone, followed by the financial crisis. In March, we saw the triple kill of stocks and bonds in the international financial market, especially the US stocks experienced four circuit breakers. US stocks, US debt, and US oil plunged, and risk aversion sentiment rose, chasing up the price of gold.

Finally, there is a geopolitical crisis. The United States has continuously staged epidemic crises, economic crises, social crises, and international crises. This has caused the dollar index to fall, and the depreciation of the dollar has spurred the rise of gold prices, and investors will naturally increase. Holding and buying gold to hedge, continuously push up the price of gold and hit new highs repeatedly.

The second wizard is the Fed. The Fed has adopted an ultra-loose monetary policy, hitting interest rates to the end and becoming zero interest rates. Moreover, an unlimited amount of loose monetary policy was adopted to stimulate the price of gold. In fact, this round of rising gold prices has been the world’s ultra-loose monetary policy since 2016. In the first half of the year, in response to the epidemic, central banks of various countries cut interest rates more than 200 times. Interest rates in many countries have also fallen into dogs, lying on the floor. Zero interest rate. What’s more, Japan and the more than 20 countries in the Eurozone have long been in a negative interest rate environment. Not only has Germany’s national debt fallen into negative interest rates, but also the 10-year US national debt has fallen into the range of negative interest rates. In fact, this has been seen for a long time.

We are witnessing history every day. In order to cope with the impact of the epidemic on the economy, the Fed prints a huge amount of money, so the Fed is the biggest magician. The Fed said that the zero interest rate will continue, and the epidemic will not stop and the economy will not rise, the magician’s ultra-loose monetary policy will not stop, and the magic wand will push the price of gold to rise. The decline has pushed up the price of gold, including the price of a range of commodities. The U.S. dollar has been hit, and the prices of all U.S. dollar-denominated commodities have continued to rise. Silver has actually risen by more than 50% this year, and the price of gold has risen by more than 35% since the beginning of the year.

The third magic wand, we say, is an international investor, and we always have to pay it back when we come out, and the countless currencies we have issued must always be exported. Investors worry that there will be inflation in the future, that is, a large number of investors will invest in gold, which will push up the price of gold.

From the perspective of supply, in fact, the supply of gold is very limited. Although gold has been discovered for more than 10,000 years, since ancient times, the total amount of gold developed in the world is nothing more than a cube with a length of almost 21.3 meters in length, width and height. This is not a golden mountain at all.

From the perspective of demand, the demand for gold is unlimited. Gold not only has spot demand, but we also see various demands for futures, options, and ETFs. Moreover, we see that the annual commission for jewelry, this demand accounts for almost half of the demand, various hedging demands, such as industrial demand, investment demand, etc., these demands exceed supply. The central banks of various countries will also moderately increase their gold holdings.

The third pragmatic international investor released huge demand like a tiger, making the supply of gold unable to keep up with the demand. The imbalance of this attack also pushed gold higher, despite the historical price of $2,000 per ounce. In fact, it has caused a certain amount of psychological pressure on the market in the short term, but as long as these wizards do not stop the magic wand they wield and support the high operation of the rising gold price, it will be difficult to change.

The skyrocketing gold has attracted international investors to allocate gold as an asset. Everyone has increased their gold holdings. In fact, in normal years of gold asset allocation, we put 5% to 15% at a reasonable level. Although it is more reasonable for us to allocate gold appropriately in a low interest rate environment, we must also take the time to enter the market when we invest in gold at a high level. The gold price in August is running at a high level. In fact, we see that the volatility rate is still relatively high behind us. We must pay attention to the use of gold to hedge, and at the same time we must always pay attention to the three magicians supporting the price of gold, and the magic wands they wield.

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Digital Nomad

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