Fundamental factors affecting the price of gold

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					Fundamental factors affecting the price of gold
Fundamental factors affecting the price of gold
   70 years before the 20th century, gold prices were decided by national governments
or central banks, international gold prices stable. The early 70s, the U.S. dollar price
of gold is no longer directly linked to the market price of gold gradually, changes in
factors affecting the price of gold increasing, specifically, can be divided into the
following areas:
   (A) supply:
   (1) gold mining:
   a. gold mining around the world in recent years, about 2,500 tons a year or so,
changes in annual production steady.
   b. the world's proven untapped reserves of about 70,000 tons of gold.
only to be mined for 25 years.
   c. South Africa, the United States and other major gold-producing countries decline,
large-scale gold mine may be a small exploration
   d. a large gold mining normal procedure usually takes 7-10 years.
   e.1980 long-term decline in the years after, steady decline in mining investment
Impact on prices: gold mining industry by itself, limited by the properties of the price
sensitivity of low prices that take a long time to be reflected in increased output.
   (2) Central Bank gold sales:
   a. Central Bank holds gold ratio is about 19%, the ECB has been selling gold.
   b. "Washington Agreement" in September 2004, the 5 year
limit of 500 tons per year gold sales
   c. China and Japan, the proportion of central bank gold reserves of only about 1%.
   d. bank lending to the central bank gold, gold companies hedge hedge
   Impact on prices: the central bank gold sales on the gold of the largest and most
direct, is the gold bear market since 1980, one of the reasons.
   (3) Regeneration Gold:
   a. changes in smooth, there is the role of fluctuations in gold prices stabilize
   b.2005 only increased by 1.5%, to 861 tons
   c. Change of gold investors expect a greater impact on the regeneration of gold
   Impact on prices: gold contact was positively correlated Change
   (B) Demand:
   (1) industrial needs:
   a. mainly in the electronics industry needs and dental needs, accounting for 10% of
the total demand of gold is about
   b. subject to restrictions on industrial sectors, changes in smooth, little effect on
   c. 2005 year on year steady growth of 2% to 419 tons
   Impact on prices: the economic boom of the related restricted by the industry itself
   (2) ornaments gold Requirements:
   a. the ratio of total gold demand 75%, the largest share
   b.2005-year increase of 5% to 2736 tons
   c. traditional decorated with gold consuming nations as India, Saudi Arabia, United
Arab Emirates, China, Turkey,
   Impact on prices: a huge impact on prices, presents the seasonal and cyclical,
usually the first and fourth quarter, decorated with gold demand growth significantly.
   (3) investment demand:
   A. investment demand into the retail investment and EFTs (gold traded fund)
   B. EFTs to invest in gold in recent years, the latest way to 2005 tons of 53% growth
in the number of terms
   C. Asia and the Middle East countries have the tradition of investing in gold
   Impact on prices: the price elasticity of demand for investment than most other
demand factors, the greatest impact on prices.
   (C) of the U.S. dollar and gold:
   The impact of the dollar gold market has two main aspects, one U.S. dollar is the
international gold market currency price, and thus a negative correlation with the gold.
Assuming no change in the value of gold itself, the dollar fell, then the price of gold
showed up on. Another aspect is the gold dollar assets as an alternative investment
instruments. indeed in the years before 2005, the price of gold continued to rise, one
major factor is the dollar's sharp decline for three consecutive years.
   From the nearly 30-year history of statistics, the dollar and gold kept around 80%
of the negative correlation, while the data from the last decade, as Figure 1995-2003,
the U.S. dollar and gold correlation diagram, the U.S. dollar and gold are getting close
to -1%. Therefore, our analysis gold price, the dollar exchange rate movements is an
important reference.
   (D) Inflation and interest rates
   As the world's only non-credit money, gold and bank notes, deposits and
other money in different forms, its own very high value, rather than just the value of
other currencies on behalf of, and its own value is minimal. In extreme cases, the
money will be equivalent to paper, but gold at any time without losing its value as a
precious metal. Therefore, we can say that the value of gold can be used as permanent
representative. The most obvious manifestation of this sense that gold investment
value in the era of inflation - such as notes devalued because of inflation, but gold
does not. In Britain the famous suit tailor Street, for example, the price for hundreds
of years are five to six ounces of gold standard, which is evidence of gold purchasing
power of a life time. The hundreds of years ago, dozens of pounds can buy suits, but
now only buy just the sleeve. Thus, the proliferation of liquidity in the money, the era
of rampant inflation, gold would be the characteristics of its fight against inflation,
much favored by investors.
   Have a major impact on the price of gold is the real interest rates after inflation
levels, after adjusting for inflation the real interest rate is the opportunity cost of
holding gold, a period of negative real interest rates, people are more willing to hold
   (E) the crude oil market:
    International commodity markets, crude oil is one of the most important
commodity. The significance of crude oil for gold, oil prices push inflation of Health
to highlight the value of gold against inflation. Judging from historical data, nearly 30
years, an ounce of gold convertibility of the average of 15 barrels of crude oil and
gold prices were 80% positive correlation.
   Similarly, the international commodity market prices of other commodities, the
price of gold has the same effect. Gold began this round of the 2000 bull market, with
the international commodity market, crude oil, copper, led by energy, metals and some
agricultural prices rose sharply. From the 1804-2004 World commodity 价格走势图
point of view, around the year 2000 is just another round of world commodity prices
and the beginning of a historic bull market. In these two hundred years, has a total of
5 other super bull market, the shortest duration of 15 years, the longest was 40 years.
   (6) geo-political situation:
   Gold history is the best means of hedging, the so-called "cannon sounds,
tons of gold", that is a perfect interpretation of the value of the gold hedge.
Any time of war or political situation will promote the rose gold is often volatile, and
time often make sudden short-term price of gold soared drastically. 21 January 1980,
gold reached record high, 850 dollars an ounce. One important factor is the turmoil
the world situation at that time - 1979 11 月 发生 kidnapped American hostages in
Iran, in December the Soviet invasion of Afghanistan, allowing gold to 30-50 dollars
per day rate soaring.