What are the influencing factors of market trend: I. Wealth and economic expansion Economic expansion will promote the increase of demand for gold ornaments, science and technology gold and long-term savings, so it is positively correlated with economic growth.
The impact is particularly significant in developing countries that will be seen as luxury goods and wealth preservation vehicles, including China and India.
Market risk and uncertainty Market risk and uncertainty are also significant for gold’s long-term performance.
Many investors see gold as the ultimate safe-haven asset, offering an effective hedge against currency depreciation, high inflation and other systemic risks.
Basically, no one can perfectly cover the specific uncertainty factors affecting gold, but economic and political uncertainty may account for a large proportion.
Opportunity CostOpportunity cost refers to the value of the most profitable of the alternatives we have not chosen when we have made a choice, so when investors choose gold, the interest rate on almost risk-free government bonds becomes the opportunity cost of holding gold.
When inflation is higher than the interest rate on bonds, gold becomes a very attractive investment.
And because gold is priced in dollars, when the greenback weakens, it also pushes up investors’ appetite for gold.
Market Momentum and PositionPrice momentum or similar trends may also further enhance or weaken gold’s performance.
Global holdings of gold ETFs and similar products rose by 61 tonnes in January 2020, with net inflows of $3.1 billion, bringing total holdings to an all-time high of 2,947 tonnes.
It is also possible to observe the attitude of global investors based on the long/short positions in global gold futures.
Finally, there are the gold reserves of central banks, which have driven demand for gold in recent years as they diversify their currency reserves away from accumulating paper money.