Gold price increased by 14.64% and 33.94% during the year
According to the tracking data of business news agency, as of December 31, the spot price of gold was 392.70 yuan / g, an annual increase of 14.64% compared with 342.54 yuan / g at the beginning of the year (01.01), an increase of 18.39% compared with 331.75 yuan / g at the trough of the year (3.19), and a decrease of 12.34% compared with 448 yuan / g at the peak of the year (8.7).
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In 2020, the spot gold price will increase by 14.64% in the year, and the amplitude will be as high as 33.94% in the year (the above data are calculated based on the price at the beginning of the year). The monthly price of spot gold in 2020 is as follows:
During the year, the trend of gold price generally showed a trend of first rising, then falling, and then rising in the last month. The downward correction bands were concentrated in the first ten days of March, the middle ten days of August, the middle and last ten days of September, and November; The downward adjustment in March was mainly based on the general decline of assets under the pressure of US dollar liquidity under the influence of the epidemic news, followed by the influx of various funds to hedge against risks, the surge of gold investment demand, and the surge of gold ETF positions. On August 7, the gold price reached an all-time high of nearly 450 yuan / g, and the early profit taking funds began to take profits. In addition, the vaccine news, the US stimulus fiscal deadlock and other factors In December, affected by the news of the new virus strain in the UK, the optimistic expectation of vaccine was greatly reduced, and the risk aversion began to pick up again. (see figure below)
Five years of upward channel to a new record
Looking at the historical price data of gold in the past 10 years, the current gold price is at a cyclical low. Since August 2, 2015, the upward channel, especially since May 2019, the gold price has entered a fast rising channel, with the price rising from 280.55 yuan / g to 392.70 yuan / g, an increase of 39.98% (taking the gold price on May 1, 2019 as the benchmark price).
At present, the gold price is 217.10 yuan / g, an increase of 80.88% compared with the low in recent 10 years; the high in this year is 448 yuan / g, an increase of 106.36% compared with the low in recent 10 years.
According to the commodity index analysis system of business community, the gold commodity index on December 31 was 104.33, down 12.34% from the highest point of 119.02 points (2020-08-07) in the cycle, and up 80.88% from the lowest point of 57.68 points on August 2, 2015. (Note: period refers to the period from September 1, 2011 to now)
To lengthen the cycle, according to the Comex gold futures price data, after the last peak fall, the gold price has entered the upward channel in the past five years, and reached a historical high again in August 2020. At present, the price is still relatively high in history.
The supply reduction in 2020 is mainly reflected in the second quarter
In 2017-2020, the global gold quarterly supply is between 1028-1265 tons; the annual supply is generally increasing in 2017-2019; in the second quarter of 2020, affected by the epidemic situation, the global quarterly supply is down 15.5% year on year; in the third quarter of 2020, the global quarterly supply is down 3.3% year on year. In the first three quarters of 2020, the global gold supply decreased by 195.24 tons compared with the same period last year, of which 188.67 tons decreased in the second quarter compared with the same period last year.
Investment demand leading price trend in 2020
According to the data of the world gold association, the total global demand for gold in the first half of 2020 was 2076 tons, a year-on-year decrease of 6%. Among them, the demand for gold bars and gold coins was 397 tons, a year-on-year decrease of 17%; the global demand for gold ornaments was 572 tons, a year-on-year decrease of 46%; the demand for science and technology gold was 140 tons, a year-on-year decrease of 13%; the net purchase volume of central banks was 233 tons, a year-on-year decrease of 39%; the increment of gold ETF was 734 tons.
In the third quarter, the demand for gold bars and gold coins, which are relative to investment demand, increased sharply with the rapid rise of gold price in the early stage. With the help of profit-making effect, the retail investment demand for physical gold in other markets except Thailand increased sharply. The demand for gold bars and gold coins in the third quarter was 222.1 tons, up 49% year-on-year. The gold ETF, which is also an investment demand, increased significantly in the third quarter due to the late price correction The growth rate slowed down to 272.5 tons in the quarter. It was not until November in the fourth quarter that the global total position declined for the first time in the year. The position decreased by 107 tons, and the increment of gold ETF decreased to 916 tons from 1022 tons in the previous October, still setting an annual inflow record. The previous highest annual inflow was 646 tons in 2009.
In the third quarter, physical consumer demand remained weak, with gold jewelry demand of 333 tons, a year-on-year decrease of 29%; science and technology gold demand of 76.7 tons, a year-on-year decrease of 6%; affected by the reduction of 45.5 tons of gold held by the Turkish central bank in September, the global central bank’s gold demand showed a small net sale of 12.1 tons in the third quarter of 2020, which was the first net sale since the fourth quarter of 2010.
In the first three quarters, the total global gold demand was 2968.2 tons, of which investment demand accounted for 62% and consumption demand 38%. The increment of gold ETF surpasses the consumption demand of gold ornaments and ranks first in the demand list. (see the figure below for demand data and proportion in the first three quarters of 2020)
It can be seen that in 2020, the factors of supply and demand of gold physical consumption with commodity attributes have extremely weak influence on the trend of gold price, and the factors of investment demand with monetary / financial attributes based on anti inflation and risk aversion completely dominate the trend of gold price.
The underlying logic of gold price rising under the guidance of financial attributes in 2020
Global money supply easing is expected to be strengthened in 2020. The development of the novel coronavirus pneumonia has been shrinking global economic activities. To slow down the economic downturn and curb the recession, the supply of money in the world’s major economies is relatively abundant, and the liquidity is released on a large scale to prevent liquidity crisis and financial crisis. Monetary supply is looser than expected, monetary demand is stronger than expected. As an investment product to hedge inflation, gold is easily favored by capital.
The downward trend of interest rates of central banks is expected to be confirmed in 2020, especially the US dollar interest rate. In 2020, the real interest rate of US dollar will turn negative due to inflation and the decline of nominal interest rate. Under the influence of the continuous expansion of the Federal Reserve’s balance sheet and the relative flooding of US dollar liquidity, the US dollar devalued and weakened.
In a general logical sense, the depreciation of the US dollar means that when the product gold is priced in US dollars, more gold can be purchased when it is purchased in other currencies, which stimulates the supply and demand of international gold and increases the demand for gold, thus pushing the price up. The depreciation of the US dollar indicates that the market’s confidence in the US dollar is weakened, and the holding of the US dollar is reduced, and the holding of gold is increased, which leads to the rise of the price of gold.
As an interest free hedging investment product, gold has a prominent investment value when the interest rate goes down, especially when the real interest rate is negative.
Based on the above factors, the market expectations are highly consistent, the market leverage trading superimposes speculation, and the investment demand for Gold surges.
Some reasons for the operation of gold price in 2021
Logic layer:
The global economy is expected to be better in 2021. The OECD predicted in November that the global economy will grow by 4.2% in 2021 and shrink by 4.2% in 2020. The last time the OECD released its quarterly forecast was in September, when it expected the economy to grow by 5% in 2021. (the comparison of the two forecasts for major economies is shown in the figure below)
Inflation expectations in 2021 may decline over time. As the only country with positive annual GDP growth in major economies in 2020, China’s monetary policy is gradually returning to normalization. The monetary policy committee of the people’s Bank of China pointed out at its regular meeting in the fourth quarter of 2020 (the 91st session in total), that a prudent monetary policy should be flexible, accurate, reasonable and moderate, maintain the continuity, stability and sustainability of monetary policy, grasp the time effect of the policy, and maintain the necessary support for economic recovery. We should comprehensively use and innovate a variety of monetary policy tools, maintain reasonable and sufficient liquidity, keep the growth rate of money supply and social financing scale basically matched with the economic growth rate, and keep the macro leverage ratio basically stable. Domestic CPI data shows that China’s inflation pressure is not big at present, and it is expected that the later monetary policy will focus on “drip irrigation”.
The depreciation of the US dollar has a bottom, and the US Federal Reserve has a large operating space in terms of interest rates. Recently, the United States launched the second round of fiscal stimulus plan (bail-out plan), which emphasized the purchase and distribution of new crown vaccines. The success of vaccine R & D and promotion will effectively alleviate the continuous downward trend of the economy. In 2021, the financial stimulus of the United States will gradually decline.
Capital level:
When the epidemic subsides and the economy recovers, risk aversion will gradually subside, capital risk preference will rise, and the scale of holding gold will decline with the investment enthusiasm of other competitive products. At present, the price of gold is at a relatively high level in history, and the risk of being bullish continues to accumulate over time. Therefore, ye Jianjun, an analyst of business news agency, believes that in 2021, the trend of gold price is generally in a “^” type, with narrow upward space. The operating range is 350-430 yuan / g, and the operating range of international gold price is 1660-2050 US dollars
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