Why Gold Prices Are Soaring?
Recently, the price of gold has soared, from 20:00 on February 13, 1991.94 USD/ounce to 2:2177.31/ounce on March 8, in just 23 days, the price of gold increased by nearly $185.3 per ounce, an increase of 9.3%. Converted to the Chinese market: that is, the price of raw gold in the international market rose from 462.64 yuan/g to 505.69 yuan/g. Break through the 500 yuan mark. What information does the surge of gold reflect the international market in a short time? What factors caused the international gold price to soar?
There are many factors affecting gold, among which there are two core factors:
One is the dollar index. after World War II, the United States made a lot of money and had a large amount of gold reserves. On this basis, the Bretton Woods system was established: the US dollar was directly linked to gold. Although the system collapsed due to the lack of gold in the later period, the value of gold and the US dollar was on the seesaw. The US dollar index fell and the price of gold rose. Due to the downturn of the U.S. economy, in order to curb the high inflation rate in the United States, the Federal Reserve turned to a tight economic policy of lowering interest rates under the policy of raising interest rates for a long time. The Federal Reserve cut interest rates, and residents changed from savings to consumption. U.S. exports exceeded imports, the U.S. dollar depreciated, the U.S. dollar index fell, and gold prices soared.
The other is the risk index. As a natural currency, gold has a good risk aversion function. There are many international risks shortly.
Expected risk： Trump to run again as 2024 U.S. election looms. A recent election survey shows that Trump is very likely to win. Refer to Trump’s fiscal policy and current remarks about the U.S. economy during his administration. If Trump takes power, the Federal Reserve will cut interest rates to zero interest. The US dollar index will fall further, and the price of gold will rise further.
Oil price increase: International oil prices are closely related to international gold prices. the price of gold increases with the increase in oil price. The world’s oilfields Middle East conflict rages on. On October 7, 2023, the Israeli military claimed that the residents of the Palestinian-Israeli border were attacked by Pakistan, and Israeli Prime Minister Netanyahu declared Israel a “state of war”. The Palestinian-Israeli conflict has officially begun. International gold prices have ushered in another surge. Subsequently, the United States, the United Kingdom and other countries used their international voice to speak for Israel internationally. On October 10, 2023, the Houthis in Yemen warned the United States and other countries not to intervene in the Palestinian-Israeli conflict; on October 31, the Houthi attacked Israel; on November 14, the Houthi said that it would “attack all Israeli ships on the Red Sea”; on November 19, the Houthis said that they would detain an Israeli ship. Block the Strait of Mandel. Market turmoil and a surge in oil prices pushed international gold prices higher.
Increased transportation costs: The blockade of the Mandel Strait led to the paralysis of the Suez Canal, a maritime passage in Asia, Europe and the Americas. Ships traveling through Asia and Europe to the Americas need to go around the entire African continent, adding 10,000 miles to the voyage. This raises the cost of transportation, and the cost of goods on the international market rises. The international price of gold has also risen.
In order to resist risks, the demand of central banks has increased: The global situation is volatile, with geopolitical conflicts around the world, a declining dollar index, rising oil prices, and other uncertainties leading to global economic windfalls major central banks to hedge their bets against risk by buying up gold and stockpiling large quantities of it. Investors follow the central bank, increase the purchase of gold. International gold prices rose.
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