At the beginning of the new year, the gold price broke, the geopolitical risks of the United States and Iran, and the need for risk aversion, of course, was a major factor supporting the gold price
In addition, the main central banks maintain loose monetary policy, which is also a big support for the gold price.
A few days ago, we also mentioned that “gold in troubled times” is traditional wisdom. Whenever financial markets are turbulent, gold is a refuge for funds. In particular, the risk of market turmoil is due to the heating up of geopolitical risks. Even if there is a fire or war, the market demand for gold is even greater.
The biggest characteristic of gold is the precious metals that are widely accepted by the global central bank
Historically, gold was once a currency in circulation and was linked to currency issuance. It was widely recognized by the market and made it a safe haven.
However, as long as there is no major war, geopolitical risks may not always last. Another major element that supports the price of gold is loose monetary policy.
In the long run, the price of gold is negatively correlated with the target rate of the US federal funds, that is, the interest rate is downward and the gold price is upward; the interest rate is upward and the gold price is downward. For example, since 2000 (when the U.S. interest rate was 6.5% in December), the U.S. interest rate began to fall repeatedly until the financial tsunami period. The Fed lowered the interest rate to 0.25% in December 2008. From the level of about 270 US dollars per ounce in 2000 to over 880 US dollars per ounce at the end of 2008, an increase of more than 2.2 times.
Take history as a mirror: interest rate easing gold price
In addition to interest rate cuts, monetary policies such as Quantitative Easing will also push up the price of gold. Quantitative easing means that the Fed injects funds into the market by actively buying securities such as government bonds from the market. As the money supply increases, investors will invest in valuable assets such as gold in order to hedge the risk of currency depreciation. During the three rounds of quantitative easing in the United States, the total assets held by the Federal Reserve Board increased significantly from approximately US $ 900 billion in mid-2008 to approximately US $ 4.5 trillion in mid-January 2015. The price of gold rose from about $ 920 to about $ 1,270. It can be seen that interest rate cuts and volume widening are the main sources of upward momentum for gold prices.
Although the Reserve Bureau has not increased its quantitative easing, it is also a easing currency policy to provide liquidity to the market by restarting the long-lost repo operation. In fact, the total assets of the Reserve Bureau were also reduced from less than 4 in the previous year. Trillion US dollars, rose to about 4.2 trillion US dollars; coupled with Powell Chairman Powell has stated that this year tends to freeze interest rates, other central banks, at the beginning of the new year, the People’s Bank of China has reduced the deposit reserve ratio to release water, the outside world is also expected to the European Central Bank The new president Lagarde is also a partial pigeon. The loose monetary environment has also achieved a strong gold price.
In addition to buying and selling real money, investors can also invest in “paper gold”, that is, open a precious metal passbook account with some banks. This method will be more convenient than buying and selling real gold, but please note that this account is not subject to the Hong Kong Deposit Protection Scheme. Protection. In addition, investors can also invest in gold ETFs that have a higher degree of correlation with gold prices. Among them, the most actively traded are the SPDR gold ETF (02840) and value gold (03081).