Most of the changes in the price of gold are influenced by the supply and demand of gold itself. Therefore, as an investor with his own investment principles, he should know as much as possible about any factors that affect 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 the purpose of reasonable investment. The main factors include the following aspects:

I. Trend of the US dollar

Although the dollar is not as stable as gold, its liquidity is much higher than that of gold. So the dollar is considered as the first kind of currency, and gold is the second kind. When the international political situation is tense and uncertain, people will buy gold because they expect the price of gold to rise. But the currency held by most people is actually dollars. If the country needs to buy weapons or other materials from other countries during the war, it will also sell its gold for dollars. Therefore, the dollar will not necessarily rise during the period of political instability, but also depends on the trend of the dollar. Simply put, the dollar is strong and gold is weak; Gold is strong and the dollar is weak.

Usually, investors choose to save money when they protect their capital. If they take gold, they will give up dollars, and if they take dollars, they will give up gold. Although gold itself is not legal tender, it still has its value and will not depreciate into scrap iron. If the dollar is strong and there is a great chance of appreciation, people will naturally chase it. On the contrary, when the dollar weakens in the foreign exchange market, the price of gold will strengthen.

Calculation of correlation coefficient between dollar index and gold

(Last week: 2 September 20071)

period

pearson correlation coefficients

Nearly a hundred weeks.

-0.9

Nearly 200 weeks

-0.524

Nearly 300 weeks

-0.737

Table 5. Calculation of correlation coefficient between1USD index and gold, data source: Bloomberg, 2007.

As shown in Table 5. 1, taking September 2, 2007 1 as the latest data, there is a significant negative correlation between the dollar index and the weekly correlation coefficient of gold, and the Pearson correlation coefficient in recent weeks 100 reaches -0.9, that is, the dollar rises or falls1unit, which can cause the reverse change of gold by 0.9. This shows that the dollar and gold are in opposite directions in mathematical statistics.

Second, war and geopolitics.

In times of war and political turmoil, economic development will be greatly restricted. Due to inflation, any local currency may depreciate. At this time, the importance of gold is fully demonstrated. Because gold has recognized characteristics and is an internationally recognized trading medium, people will invest in gold at this moment. Buying gold will inevitably lead to an increase in the price of gold.

But there are other factors. For example, from 1989 to 1992, there have been many political turmoil and sporadic wars in the world, but the price of gold has not risen. The reason is that everyone held dollars at that time and gave up gold. Therefore, investors should not mechanically use war factors to predict the price of gold, but also consider other factors such as the US dollar.

Third, the world financial crisis.

If a world-class bank goes bankrupt, how will the price of gold react?

In fact, this situation is due to the emergence of the crisis. People will naturally hold their money in their own hands, and banks will have a large number of runs or failures. This situation is just like the recent economic crisis in Argentina. People all over the country want to exchange US dollars from banks, but the country prohibits the exchange of US dollars in order to reserve the last investment opportunity, which leads to continuous riots and panic throughout the country.

When the financial system of the United States and other western powers is unstable, world funds will be invested in gold, and the demand for gold will increase, and the price of gold will rise. At this time, gold played the role of a financial refuge. Only when the financial system is stable, investors' confidence in gold will be greatly reduced, and selling gold will lead to a decline in the price of gold.

Fourth, inflation.

We know that the purchasing power of a country's currency is determined by the price index. When the price of a country is stable, the purchasing power of its currency is more stable. On the contrary, the higher the currency exchange rate, the weaker the purchasing power of the currency and the less attractive it is. If the price index in the United States and major regions of the world remains stable, holding cash does not depreciate, and there is interest income, it will inevitably become the first choice for investors.

On the contrary, if inflation rises sharply, holding cash is completely insecure, and interest can't keep up with the sharp rise in prices, people will buy gold, because the theoretical price of gold will rise with inflation at this time. The higher the inflation in major western countries, the greater the demand for gold as a safe haven, and the higher the world gold price will be. Among them, the inflation rate in the United States is the most likely to affect the change of gold. In some smaller countries, such as Chile and Uruguay, the annual inflation rate can be as high as 400 times, but it has no effect on the price of gold.

Chapter 20 Analysis of Influencing Factors of Gold Price (2)

Verb (abbreviation for verb) oil price

Gold itself is a hedge against inflation, which is inseparable from inflation in the United States. Rising oil prices mean that inflation will follow, and so will gold prices, as shown in Figure 5. 1.

Figure 5. 1, price comparison chart of gold and crude oil, data source: Bloomberg, 2007.

Local interest rate of intransitive verbs

Investing in gold will not earn interest, and the profit of its investment depends entirely on the price increase. When the interest rate is low, there will be some income from investing in gold; However, if the interest rate rises, it will be more attractive to collect interest, and the investment value of interest-free gold will decline. Since the opportunity cost of gold investment is high, it is more stable and reliable to put it in the bank to collect interest. Especially when the interest rate in the United States rises, 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 domestic interest rate is high, it is necessary to consider whether it is worthwhile to lose interest income to buy gold.

Seven. economic situation

Prosperous economy and carefree life will naturally enhance people's desire to invest, people's ability to buy gold for preservation or decoration will be greatly increased, and the price of gold will be supported to a certain extent. On the contrary, people live in poverty. During the economic depression, people can't even meet the basic guarantee of food and clothing. Where are they interested in investing in gold? The price of gold is bound to fall. The economic situation is also a factor that constitutes the fluctuation of gold prices.

Eight, the supply and demand of gold.

The price of gold is based on supply and demand. If the output of gold increases significantly, the price of gold will be affected and fall back. However, if the output stops increasing due to the long-term strike of miners, the price of gold will appreciate in the case of short supply. In addition, the application of new gold mining technology and the discovery of new mines have increased the supply of gold, which will of course cause the price of gold to fall. A place may also have the habit of investing in gold, such as Japan's gold investment boom, which needs to be greatly increased, which also leads to price increases.

Among the factors that determine the success or failure of gold trading, the most crucial thing is whether the price trend of gold can be correctly analyzed and judged. Gold trading is not like buying size, it depends entirely on luck. Even if the benefits can be obtained, the results can not be controlled at all, and it is necessary to predict through certain analysis. There are two main methods to predict the price trend: basic analysis and technical analysis. Both of them analyze the market from two different angles and have their own characteristics in actual operation, so investors should combine them.

Nine. Overview of basic analysis

The so-called fundamental analysis focuses on the external and internal factors of politics, economy and a single market. Add other investment tools to judge whether the market should enter or leave, and adopt corresponding strategies.

Analysts with basic analysis as the main analysis method have been studying the prices of gold mining companies, relevant information of government departments and reports of various institutions all day to speculate on the future trend of the market. The main factors involved in the basic analysis have been involved before, in a nutshell, they include:

1, political situation

Political turmoil is usually favorable to the price of gold, and war will make the price rise and support the price of gold. World peace will adversely affect the price of gold.

2. Gold production

The increase or decrease of gold production will affect the balance between supply and demand of gold. The output of gold is the largest in South Africa, and any workers' strike or other special circumstances will affect its output. Secondly, the production cost of gold will also affect the output. 1992, due to the increase of gold production cost, many gold mines stopped production, which led to the high price of gold for a time.

3. Government behavior

When the government needs to collect foreign exchange, regardless of the price of gold at that time, it will sell the gold reserves to obtain it. Correspondingly, the data of government gold recovery is also an important indicator affecting the price of gold.

4. Gold demand

Gold is not only a tool to preserve value, but also used for industry and decoration. Changes in the production of electronics, dentistry, jewelry and other gold industries will affect the price of gold.

5, the dollar trend

Dollar and gold are relative investment tools. If the dollar is strong, there will be greater gains from investing in the dollar, so the price of the dollar will be affected. On the contrary, when the dollar is in a weak market, investors will reduce their capital investment in the dollar and invest in the gold market instead, pushing the price of gold to strengthen.

Chapter 20 Analysis of Influencing Factors of Gold Price (3)

6. Inflation

When the price index rises, it means an increase in inflation. The arrival of inflation will affect the preservation function of all investments, so the price of gold will also rise and fall. Although the role of gold as an anti-inflation weapon is not as good as before, the rise of Qualcomm will still stimulate the price of gold.

7. Interest rate factor

If the interest rate is raised, investors will get higher deposit interest rate, which will have a negative impact on interest-free gold. On the contrary, falling interest rates will be more beneficial to gold prices.

There are many aspects in the basic analysis of gold trend. When we use these factors, we should consider how strong their respective functions are. Find out the primary and secondary positions and influencing time periods of each factor, and make the best investment decision.

The basic analysis of gold can be divided into short-term (usually three months) factors and long-term factors. We should treat its effects separately, as shown in Table 5.2.

Short-term basic analysis factors

Long-term basic analysis factors

supply

labour disputes

Recovery situation

The foreign exchange situation of the producing country

Central bank selling

inventory carrying cost

New mining technology

The discovery of new mineral deposits

Expected production cost and profit

Government support policy

ask

Price of alternative metals

Political events and situations

foreign exchange rate

National reserve demand

Expected price level

Interest rate level

Consumption trend of industrial gold

Situation of electronic and chemical industries

Situation of jewelry industry

The government casts gold.

income level

age distribution

Social habits

Inflation rate trend

Table 5.2 Analysis of Basic Analysis Factors of Gold

X. Defects and limitations of gold-based analysis

Before investors buy or sell gold, the first step is to analyze the fundamentals. Without basic analysis, investors can't know the current situation of the market, nor can they know whether the gold market is shrinking or growing; Whether the market conditions are overheated; Whether to enter or leave now; Whether the investment funds are increased or decreased; What is the market trend? All these basic factor analysis are indispensable steps.

But the basic analysis of gold still has some limitations:

1, the data of some gold-producing countries are difficult to obtain or time lag.

Some gold-producing countries are reluctant to announce the gold production figures to the international community, or the figures are released with a certain lag, and the figures of experts can only be estimated. Therefore, when these countries are collecting foreign exchange, the amount of gold they put on the market may completely shock the market. The basic analysis in this respect is somewhat incomplete.

2. In an open market, it is difficult to achieve accurate demand figures.

The figure of gold supply only needs to add up the annual output of major gold-producing countries to get more effective figures. However, it is more difficult to obtain demand data. For example, some enterprises will melt gold coins for industrial production, so the demand figures include the factor of double counting. Therefore, it is impossible to make fundamental analysis with accurate figures.

Can't tell us the timing of entering the market.

After fundamental analysis, we all know that the price of gold is in the stage of big bull market. But when will you step in? Do more now, and the price may be lower the day after tomorrow. By next week, it may be the lowest price now. Therefore, fundamental analysis can only tell us the general trend of gold prices, and can not provide us with the best time to enter the market at all.

4, can't capture the recent peaks and valleys.

Even in the big bull market, the price of gold will go up and down. If you can grasp the trend of each wave, absorb it at a high point and sell it at a low point, the profit you get will be much higher than what you simply hold. The basic analysis is that these subtle changes can't be captured.

We can only analyze the general trend of the market, but we can't answer the reasons for the rise and fall of the market price, which is based on basic analysis. Therefore, in addition to basic analysis, gold trading needs to be supplemented by technical analysis.