In fact, it is very simple. The epidemic situation, how did the epidemic cause gold to rise, the internal reason is that the people panic and the dollar is not fragrant. Judging from recent data, the US epidemic has directly led to a 30% decline in GDP, and the degree of economic recession has far exceeded our imagination. We can return to the essence of gold, gold is internationally recognized, universal, and the most valuable hard currency. Obviously, fools know that when the economy is bad, they buy gold, but it is not necessarily for the value of gold.
At present, investors are looking forward to the non-agricultural data tonight. The un optimistic employment data may exacerbate the decline of the dollar, bullish gold, and boost gold prices. This is another big test for bulls!
Is gold a good asset?
Still using data to speak, Professor Schiller has counted the rate of return of a group of assets in the past 200 years (1802~2013), which are the historical performance of stocks, bonds, gold, and cash, and found that if you invest 1 in 1802 USD stocks, then in 2013, after deducting inflation, you will still have a return of $930,550. If you invest in bonds, the return is $1505. If you invest in Treasury bonds, the return is $278. If you invest in gold, the return is $3.21. If you hold U.S. dollars, the return is the worst, because cash is the most eroded by inflation.
Obviously gold is not the best asset, so it is argued that the purchase of gold in 2020 is not for the investment value of gold.
When does gold generally start to rise?
Since there is no so-called war rising theory, why gold has risen so much in the past few decades, all things are natural, we still return to the origin, all commodities have their cycles. We can find that when the streets are filled with high-yield assets, no one wants to take non-interest-bearing gold. And when there are no high-return assets in the streets, especially when the real interest rate is close to zero or negative, the anti-inflation and investment value of gold will be highlighted, and the price will go up.
The real rise of gold began in the second half of 2018, when interest rates started to be cut across the world, and even six countries have already had negative interest rates. Therefore, gold is sought after and prices have risen all the way. We often hear about the seesaw relationship between the U.S. dollar and gold, because when the nominal interest rate of the U.S. dollar rises, it will attract more investors to buy the U.S. dollar, causing the U.S. dollar to rise, so gold will fall. You can check the trend of the U.S. dollar index over the past few decades. Whenever the U.S. dollar index goes up, the price of gold goes down. Conversely, when the U.S. dollar index goes down, gold goes up.
Finally, we can find a small rule whenever our stock market enters the bottom of a bear market, the general market for gold is very good, the reasons have been mentioned above.
Do you want to hold gold?
As mentioned earlier, gold does not generate interest, so holding gold will not get any income. In the end, whether we should buy gold or not, in fact, as a gold investment itself is not a problem, but it depends on its price and value.
First of all, we look at its price. What determines its price? Isn’t it just mining to increase costs? What is the cost of gold mining?
I checked the gold data of the past few years and only got 2018 data. From the perspective of development costs, the current production cost of major gold mines in the world is US$1,000 per ounce. Because gold mining costs are different in different regions, gold mines are buried deeper and difficult to mine, and can even raise the cost to 1,500 US dollars per ounce some less difficult costs may only cost 900 US dollars per ounce. In addition, the purpose of gold business mining is to make profit, and to resist the risk of exchange rate fluctuations, and future inflation, this comprehensive cost is usually set at 1,200 US dollars per ounce. This value is currently the highest internationally recognized price and the most divergent price on the trend.
The cost varies greatly in different regions, the lowest in the United States is only 733 US dollars / ounce, and the highest in Australia is 1829 US dollars / ounce. According to market survey data, among the world’s top ten gold mining companies, data from 7 companies show that the current average gold mining cost has reached US$1,201 per ounce. Therefore, US$1,200 per ounce has become the world’s recognized average cost price of gold.
When the cost comes out, the value obviously comes out. What was the highest price of that batch of gold in 2011, it was 1921 US dollars, right? What was the mining cost at that time? According to the inflation rate of 3%, it will be around US$900 in 2011, so that the price of gold can be calculated.
If you want to buy and sell gold as an investment product, you can know the profit by calculating according to the above rules.
Therefore, the conclusion comes out. As an asset, gold is actually an asset with strong hedging properties and is very suitable as a part of asset allocation. It can reduce the volatility (retracement rate) of the investment portfolio. And according to the current global situation and the variability of the epidemic, in the medium and long term, gold and silver still have the conditions to rise.