Nowadays, people are pursuing gold, not only for investment purposes and the manufacture of jewelry, but also for the manufacture of certain electronic and medical equipment. Gold (as of March 2021) has exceeded US$1,700 per ounce, which is much higher than the level below US$100 per ounce 50 years ago.

What factors will cause the price of this precious metal to rise over time?

Investors have been fond of gold for a long time, and the price of gold has risen sharply in the past 50 years. Like most commodities, supply and demand are extremely important, but gold also retains additional value. The government treasury and the central bank constitute one of the important sources of demand for the metal. Investment demand, especially the investment demand of large ETFs, is another factor in the price of gold. The price of gold is sometimes the opposite of the U.S. dollar because the metal is priced in U.S. dollars, which can hedge against inflation. In recent years, the supply of gold has been mainly driven by the mining industry.

Central Bank Reserve:

The central bank holds banknotes and gold reserves. In recent years, central banks have tended to diversify their reserves, focusing on reducing their holdings of foreign currencies in their portfolios and accumulating gold reserves at the same time.

Bloomberg reported that since the United States abandoned the gold standard in 1971, central banks around the world have been buying gold.

According to the World Gold Council, Turkey is the largest gold buyer in 2019, followed by Russia, Poland and China. In general, governments of various countries purchased 650 tons of gold in 2019, which is close to the highest level in 50 years.

The value of the dollar:

The price of gold is usually inversely proportional to the value of the U.S. dollar, because gold is priced in U.S. dollars. When all other conditions remain unchanged, a stronger dollar tends to limit the increase in the price of gold, while a weaker dollar may push up the price of gold through increased demand.

Therefore, gold is usually regarded as a hedge against inflation. As inflation intensifies, the price of gold also rises.

Global jewelry and industrial demand:

According to the World Gold Council (World Gold Council) data, in 2019, jewelry accounted for about half of gold demand, with a total demand of more than 4,400 tons. In terms of quantity, India, China and the United States are the main consumers of jewellery gold. Another 7.5% of the demand is related to technology and industrial uses. For example, gold will be used to manufacture medical devices (such as stents) and precision electronic products (such as GPS devices).

Therefore, the price of gold may be affected by the basic theory of supply and demand. As the demand for consumer goods such as jewelry and electronics increases, the cost of gold may rise.

Wealth protection:

When the economy is uncertain, such as during a recession, more people turn to investing in gold due to its lasting value. In turbulent times, gold is often considered a "safe haven" for investors. When the expected or actual returns of bonds, stocks and real estate decline, people's interest in gold may increase, thereby pushing up its price. Gold can be used as a hedging tool to prevent economic events such as currency devaluation or inflation.

Investment demand:

In recent years, investors’ demand for gold-based exchange funds (ETFs) has increased. SPDR Gold Trust (GLD) is one of the largest gold trusts, holding more than 1,078 tons of gold in March 2021. According to data from the World Gold Council, the total amount of gold purchased from various investment instruments in 2019 was 1,271.7 tons, which totaled more than 29% of the demand for gold.

Gold production:

Major players in global gold mining include China, South Africa, the United States, Australia, Russia and Peru.

The output of gold mines in 2018 was approximately 3260 tons, higher than the 2500 tons in 2010. However, in the past 30 years, the average annual output of gold has been between 2500 and 3,500 tons. Although the amount of gold that has been mined has been increasing in the past ten years, the production of mined gold has stabilized since 2016. One reason is that "easy-to-mine gold" has been mined. In short, future gold mining will require higher technology, which will increase the production cost of gold mines and contribute to higher gold prices.

Human beings have always been obsessed with gold. Today, the economic environment tends to favor gold. In general, the demand for gold continues to rise. The amount of gold in the central bank’s reserves, the value of the U.S. dollar, and the desire to hold gold to hedge against inflation and currency depreciation all help. To promote the price of precious metals.