What are the influencing factors of the gold futures market trend:
Wealth and Economic Expansion
Economic expansion drives up demand for jewellery, technology gold and long-term savings, so there is a positive correlation between gold prices and economic growth. This factor is particularly pronounced in some developing countries, including China and India, where gold is viewed as a luxury and a store of wealth.
Market Risks and Uncertainties
Market risks and uncertainties also have significant implications for gold’s long-term performance. Many investors see gold as the ultimate safe-haven asset, which can effectively 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 of the explanation.
Opportunity cost
Opportunity cost refers to the value of the option with the greatest benefit among the options we did not choose after we made a choice, so when investors choose gold, the interest rate on almost risk-free government bonds becomes The opportunity cost of holding gold. Gold can be a very attractive investment when inflation is greater than interest rates on bonds. In addition, because the price of gold is denominated in US dollars, when the US dollar weakens, it will also push up investors’ willingness to buy gold.
Market momentum and position
Price momentum or similar trend changes could also further strengthen or weaken gold’s performance. In January 2020, global gold ETF and similar product holdings rose by 61 tons, with a net inflow of US$3.1 billion, and the total holdings reached a record high of 2,947 tons. In addition, the attitude of global investors can also be observed according to the long/short positions of global gold futures. Finally, there are the gold reserves of the central banks of various countries. As the central banks diversify their currency reserves, from accumulating paper money to gold, it has also become the driving force of gold demand in recent years.