Globally, gold is an extremely strong industry. Only the pullbacks in the way of rising and rising are always prosperous, and it is not inferior to the rapid development of real estate in China's first-tier cities today. In fact, those who pay attention to gold prices know that in the past history, the gold industry has undergone many twists and turns. Today, we will mainly review the detailed process of several huge fluctuations in gold prices in history, and then reversely explain what conditions global gold needs to meet before it collapses.
△Overview of gold price trends over the past 50 years
To answer this question, let’s start with the relationship between the US dollar and gold.
Why is only US dollar called "US dollar"?
As we all know, the currencies of many countries were once pegged to gold, such as the British pound. Later, due to factors such as economic crisis and war, all countries gave up the "gold standard". World War II caused many countries to exhaust their gold reserves. Only the United States made great war money and accumulated huge national wealth in the form of gold.
In July 1944, the international community held a meeting in Bretton Woods, USA, stipulating that the US dollar is pegged to gold. Holding the US dollar is equivalent to holding gold. The currencies of various countries are pegged to the US dollar and can exchange gold to the United States at the official price of 35 US dollars per ounce. From then on, the US dollar officially replaced gold and became the common currency in international trade. Trades in various countries use US dollars for settlement. It was from this time that people called US dollars "US dollars".
Since then, countries around the world have used US dollars in trade transactions, and countries around the world have used a large amount of gold to the United States to exchange US dollars. In order to reduce trouble, countries simply placed gold in the United States. This is 30% of the world's official gold reserves, which are stored in the underground vault of the Federal Reserve Bank of New York. This is also the largest vault in the world, which stores nearly 7,000 tons of gold from at least 60 countries and international organizations in the world, including 600 tons of China.
The first huge fluctuation in gold prices in history
The trade surplus in successive years brought the US gold reserves to 19,900 tons in 1949, accounting for 74.6% of the world's total. With the rapid recovery of the world economy, demand for the US dollar is strong, but gold is exploited at a limited speed. In order to increase liquidity, the United States began to print a large amount of money. Due to the trade deficit, Europe has taken away a large amount of US dollars, and the United States is still issuing additional banknotes. So people were worried that the United States would endlessly print money to absorb world wealth, and countries began to use the US dollar to redeem gold.
In 1962, Charles de Gaulle summoned reporters from all over the world to say bluntly: The United States has no longer enough gold to exchange it as promised at $35 per ounce. At that time, the US gold reserves had dropped from 74.6% in 1949 to less than 30%.
In 1971, Nixon announced that the US dollar was decoupled from gold. The US dollar lost trust, and many countries sold the US dollar to buy gold. Gold rose from US$46 in 1972 to US$850 in 1980. This was the first surge in gold prices in history.
The secondary surge brought by the subprime mortgage crisis
Time came in 2007, the subprime mortgage crisis swept the world. The US government, who was not good enough, began to rescue the market, and used taxpayers' money to provide the Wall Street with the bottom line, injecting 700 billion US dollars to acquire bank assets to avoid bank bank bankruptcy.
"What is the concept of 700 billion US dollars?"
On the eve of the financial crisis, the Federal Reserve's balance sheet was only about one trillion US dollars. Where did the Federal Reserve pay 700 billion US dollars to acquire bank assets, so it was forced to carry out large-scale quantitative easing. With a large amount of money, the Federal Reserve's debts changed from 1 trillion to 1.7 trillion US dollars, and the additional 700 billion US dollars acquired banks, insurance companies, and investment banks to form their own assets. The balance sheet was flat, and was equivalent to an additional 700 billion US dollars out of thin air.
In October 2008, the US stock market suffered a serious collapse. Due to the urgent demand for liquidity, large amounts of funds were taken away from the precious metals market and the price of gold fell sharply. In just seven months, gold prices have fallen by nearly one-third.
Following the crash, the amazing rewards came. The price of gold has risen 166% in less than three years.
The reason is very simple. When the financial crisis comes, investors need to quickly withdraw a huge amount of funds to pay the margin required for other assets. Gold, as the best commodity to be cashed out, will be sold immediately. Once the initial shock subsides, the forced withdrawal of funds to replenish margins eases, and free investment gold will pour into gold, pushing up their prices. By 2010, the U.S. debt reached 12.3 trillion , and people generally worry about the credibility of the dollar.
" Then the gold was pushed up to $1,920 in the year."
The third bull market brought by the black swan
This bull market is a bit unfair to Cyprus, and it is a complete overwhelming one.
This incident started out as news that the bank of Cyprus plans to sell its gold reserves worth 400 million euros to obtain some assistance. Although the Cyprus Central Bank came out to clarify that it had not considered gold debt repayment at all. In fact, the 10 tons of gold reserves held by Cyprus are only equivalent to the sales volume of Chinese gold jewelry stores in one week, and in theory it cannot shake the market at all.
But such a rumor that has been circulating has caused the already precarious gold market to face intensive "short" attacks. Because if Cyprus sells gold reserves, other countries in the euro zone such as Portugal and Greece and may sell, and global gold will fall into a stage of big selling. The Cyprus incident has also sparked concerns about the long-reliable banking system, and people have even begun to suspect that a huge orthodox organization like the EU will have no stability in the future. Under the trend of
, investors began to have an unstable mentality. At this time, the "poisonous tongue" of international finance represented by Soros and Goldman Sachs is constantly criticizing gold. Soros bluntly stated that "the status of gold safe-haven investment has been destroyed", which triggered the eight largest listed gold trading funds (ETFs) in the world on the 10th and 11th to sell more than 20 tons of gold reserves. Many foreign institutions such as Goldman Sachs have recently released reports that they have a weak view on the trend of gold. Immediately, big-name investment banks such as UBS and Industrial Bank spoke one after another, and gold prices were about to fall.
Investors who have long become frightened have begun to sell. On April 15, 2013, after the opening of the New York gold market, it fell below the technical point of $1,540. Two hours after the initial sell-off, the market ushered in a more violent sell-off, with selling up to 10 million ounces (300 tons) of in 30 minutes. On April 16, gold plummeted 10% again to $1,358 per ounce, setting a record for the largest decline in two days in 30 years.
No one can defeat a world, but a group of people can, and the concentrated sale of almost 400 tons of gold is equivalent to 15% of the global annual gold production. This scale is unprecedented. Then the gold price ushered in a series of blows, and people began to question whether gold is worth buying. At the same time, central banks of various countries are quietly voting for everyone. According to public data, while investors are constantly suing, the central banks have joined the crazy buying process, especially in the years when gold prices are falling, and their momentum is getting stronger. Today, central banks of various countries have nearly 34,000 tons of gold, and gold has become the world's third largest reserve asset. The Dutch Central Bank said that in the context of global financial readjustment, gold inventories can serve as the basis for reshaping the world's monetary system. The reason behind this is that gold has enhanced confidence in the stability of the central bank's balance sheet and created a sense of security.
△2010-2019 The situation of the central bank purchasing gold
" A review of the three major fluctuations in the complete gold price and the corresponding impact of the entire process. So the question is, how will global gold collapse? Let's reverse the possibility."
1. Oversupply
First of all, we need to make it clear that gold is a very unique product, and gold is basically not consumed, so the traditional supply and demand theory does not apply to gold.The amount of mineral gold mined each year accounts for about 3% of the global gold holdings. is equivalent to the trading volume in the London gold market for about a week. The dynamics of annual supply are of little significance to price discovery. The mining of gold will not simply end, but if it continues, the higher the cost will only drive the gold price to continue to rise. Higher gold prices will trigger exploration of more reserves, develop previously unfeasible sources and develop new technologies, which may increase our ability to mine gold, similar to the progress of shale technology in the oil market.
clarify the above view, and we can know that the prediction of for gold prices should not look at how many new supply is in the market every year, but how much supply exists and comes to the market from gold holders. The following figure shows the world's gold supply trend from the 1980s to the present. The figure intuitively reflects that the growth rate of gold mine production has slowed down since 2015, but the waste gold flow has increased in recent years. It is worth noting that since 2009, the central bank's gold sales have approached zero. Meanwhile, gold prices remained rising as the total mining production and supply increased between 2008 and 2012. It has not been affected by market supply, this is the uniqueness of gold.
Global gold consumption demand is concentrated in jewelry, industry, investment and central bank reserves in various countries. As of 2019, the global demand for gold in the jewelry field was 2,107 tons, accounting for 48.37%. Gold investment has become the main direction of gold demand at present. The demand for gold investment rose from 856.4 tons in 2013 to 1,271.7 tons in 2019, with a growth rate of 48.49%.
2. Holders sell
First of all, industry and jewelry are both fixed demand, and it can be seen from the demand over the years that it has been growing steadily. Secondly, when economic chaos and imbalance in foreign exchange revenue and expenditure occur, gold, as the last means of payment, plays an important positive role in stabilizing the state-owned economy and maintaining the stability of the currency value. After experiencing the subprime mortgage crisis, the European debt crisis and the Cyprus Black Swan incident, it is even more impossible for the official sell-off of gold.
According to statistics from the World Gold Council (WGC), in 2018, the central banks of more than 20 countries increased their holdings of gold by 651.5 tons, a year-on-year increase of 74%, setting a record for annual increase in holdings since 1971. Among them, Russia is the representative of which leads central banks in various countries to buy gold frantically. According to the World Gold Council (WGC) data, Russia's gold reserves have been steadily rising over the past 10 years, with growth accelerating since 2014. In 2018, the Russian Central Bank bought 274 tons of gold a year, setting a record for an increase of 224 tons in 2017. Now Russia's gold reserves have quadrupled.
△2009-2019 Russian Central Bank gold reserves
Central banks in various countries buy gold mainly to diversify reserve assets, which can reduce the impact of US dollar policy on their own countries (the Federal Reserve raises interest rates). When economic chaos and imbalance in foreign exchange revenue and expenditure occur, gold as the last payment method plays an important positive role in stabilizing the state-owned economy and maintaining the stability of the currency value. The strategic significance of gold is very important, it concerns the country's development plan and is an important bargaining chip in international political game.
In recent years, due to the hegemony of the US dollar in the world, according to IMF statistics, as of the end of 2018, the US dollar accounted for 61.69% of the global foreign exchange reserves. The US dollar was used to restrict other countries from time to time. Coupled with the US dollar's increasingly large government bonds and overly self-contained monetary policy, the international monetary credit of the US dollar has declined, and some countries hope to gradually get rid of the US dollar dependence. If this trend continues, it is only a matter of time before the US dollar is abolished as an international currency. When the wool of various countries is hurt, a new recognized international currency will appear, or return to gold.
3. The demand for safe-haven is gone
To put it simply, investors no longer trust the safe-haven function of gold. The current actual situation is that due to low interest rates, 70% of sovereign debt is negative, investors have to take more risks to obtain declining returns, and bonds do not provide protective returns as they did before. From the United States, the actual yield of 10-year bonds, including inflation, was 50 basis points at the end of 2019, down more than 50% from the beginning of the year.
, the head of investment research at the World Gold Council, said in an interview recently, "Investors' risk profile continues to change. The bottom line is that by 2020, investors will need to hedge, and more and more investors regard gold as liquidity alternative assets. The central bank will become a net buyer of gold for the eleventh consecutive year."
So, with the current global situation, the conditions for the collapse of gold prices are too harsh. We cannot predict where gold will rise next month or six months later, but we never think that the gold price will really collapse. is a very dangerous behavior because of the existence of governments in various countries.
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