Recently, international gold prices have repeatedly hit new highs, once "aiming for" US$3,000, attracting widespread market attention. In mainland China, there has even been a rush to buy gold. Xia Chun, chief economist and president of the Research Institute at ApaH Capital Management, pointed out that although gold prices have been hitting new highs for over a decade, these figures do not fully reflect the actual price of gold under the influence of inflation. He predicts that gold prices will continue to rise in the future.
Xia stated that the main factors affecting gold prices include market uncertainty, the strength of the U.S. dollar, and interest rates after accounting for inflation. Generally, when the dollar strengthens or interest rates rise, gold prices tend to fall, as holding non-yielding gold is less attractive than earning interest on deposits. However, in the past three years, despite U.S. interest rate hikes and a stronger dollar, gold prices have risen against the trend, a phenomenon that has been extremely rare over the past 25 years.
Xia mentioned that this unusual situation is driven by the rapid increase in global government debt. U.S. government debt has grown from US$5.7 trillion at the end of 2000 to US$36 trillion today, an increase of 5.3 times. At the same time, the high-interest-rate environment has led to rising interest expenses for debt repayment relative to GDP. In this context, gold's appeal as a safe-haven asset has increased. Despite not providing interest income, it remains favored by investors.
Additionally, the gold-purchasing activities of central banks have provided significant support for rising prices. According to the latest reports, the proportion of gold in global central bank reserves has risen from 15% in the second quarter of last year to 21% in the third quarter. This change indicates a continuous increase in demand for gold among central banks, especially during the current unstable economic environment. Many countries are actively increasing their gold holdings even as prices rise, leaving significant room for growth compared to the historical high of 70% after World War II.
Xia pointed out that if the proportion of gold in central bank reserves can rebound from the current 21% to 30%, gold prices could reach US$4,500. Currently, over 90% of the gold on Earth has already been mined, with the total value of circulating gold at only US$3.5 trillion, further enhancing gold's scarcity and value.
Despite differing market forecasts for gold's future, the most optimistic prediction is only US$3,500. Xia emphasized that if Elon Musk can significantly reduce U.S. government spending, decrease the debt scale, and the Federal Reserve cuts interest rates to alleviate debt interest pressure, gold prices still have the potential to continue rising in the future. Considering gold's long-term value and market demand, investors' confidence in gold remains strong. Even if there are slight short-term pullbacks, the fundamental changes in gold's value are still limited.
(Guest: Xia Chun | Reporter: Kato Ip | Editor: Yi Wang | Producer: Kelly Yang)
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