The world gold market has ushered in a long-lost bull market since 2000. At the beginning of 2000, the price of gold was less than $300, and by August 2011, the price of gold had exceeded $1,800. Since then, the price of gold has continued to fluctuate greatly. In July 2016, the price of gold once again broke through $1,350. However, the good times did not last long. Since then, it has continued to fall. On December 15, 2016, it fell to $1129.8. On January 5, 2017, spot gold prices once again broke through the $1,180 mark. Some market players are bullish on gold. One of the main reasons is that the current gold price is already near the average production cost, so the current gold price level is extremely valuable. The author believes that the production cost of gold cannot form an effective support for gold prices, and current gold does not have investment value. The analysis is as follows. First, the production cost of gold companies is concentrated at $1,100-1,200, which refers to the average production cost, and not the production cost of all enterprises. It is estimated that the Russian gold producer Polyus Gold's production cost in 2014 was only 825 US dollars / ounce, followed by Australia's Newcrest Mining and Barrick, the average production cost is only 854 US dollars / ounce. According to 2014 data, six of the world's top ten gold producers cost less than $1,000 per ounce. Therefore, even if the price of gold falls to $1,000, it is still profitable for these low-cost gold producers and will continue to maintain production. Second, from an economic point of view, as long as the price of gold exceeds its average variable cost, the gold enterprise has the power to produce. Therefore, even if the “production cost support theory†is established, the gold price is supported by the average variable cost. Reliability is also stronger than the average total cost support, and support prices will move further down. Considering that the fixed cost of gold producers is not low, the average variable cost is likely to be below $1,000, and the true support price of gold may be below $1,000. Third, the gold market is mainly a game of stock market. The annual production quantity is very small compared with the gold stock. Therefore, even if the gold production declines, the gold price will not have a big impact in the short term. According to estimates by the World Gold Industry Association, the current amount of gold mined in the world is 170,000 tons, and the total supply and total demand for gold is only about 3,500 tons per year. Therefore, compared with the gold stock, the annual gold supply is not large. Even if the gold production enterprises cut production in the short term, it will not have a big impact on the price of gold. Fourth, the supply of gold is relatively stable (Table 1), and there is a large uncertainty in the demand side. The most uncertain in the demand side is the amount of central bank purchases. According to past experience, the central bank's net purchases generally account for about 25% of the total global gold demand (Table 2). However, in recent years, although the central bank's net purchases fluctuated little, the central bank's purchase preferences have undergone major changes. The central banks of the Netherlands, France, Switzerland and Europe have been reducing their holdings of gold, and China, Russia and India have been increasing their holdings of gold. Since Russia bought 48 tons of gold in October last year, it has once again bought 1 million ounces of gold (about 34 tons) in November, which has given some support to the recent gold price. However, Russia’s purchase of gold is not sustainable. Considering Russia's own economic situation is not good, the size of foreign exchange reserves is limited, limited to economic strength. Russia's continued purchase of gold in the future is not sustainable. In addition, there have been rumors in recent days that India may ban the import of gold, and India's banknotes have already had an adverse impact on the economy. Therefore, India's future purchase of gold may also have greater uncertainty. Once Russia and India stop buying, it will have a large negative impact on the world gold market demand. Fifth, from the historical experience, the “production cost support theory†of gold prices is also not reliable. The most typical time interval is 1990-2001, during which gold prices continued to remain around $300, lower than the average production cost at the time. In addition, there are market participants who believe that gold can resist inflation, and the author does not agree. The existing research has not reached an agreement on whether gold can resist inflation. Table 3 shows the volatility of gold and oil prices from 1900 to 2010. As can be seen from Table 3, the volatility of gold prices is extremely high, so it is not appropriate to aim to achieve anti-inflation targets with a high volatility asset. Analysis of the factors affecting global gold prices and future trends, the author will be introduced in detail in another article. In short, considering that gold prices are highly correlated with the US dollar index and the US real interest rate, the strengthening of the US dollar in 2017 and the Fed's rate hike cycle are high-probability events, which will continue to put pressure on gold prices in the future. In the short term, the price of gold may indeed rise due to some risk aversion caused by uncertainty, but from the general trend, it has entered the down cycle, and it is likely that the price of gold will continue to fluctuate at the current or lower level most of the time. . In addition, if the United States continues to raise interest rates in the future, there is still room for gold prices to fall. In addition, the future growth of gold is limited, and the opportunity cost of holding gold is relatively high. Therefore, the current gold price does not have a configuration value. In summary, the production cost of gold is not reliable, and it is not the ideal time to deploy gold. Cord Stoppers,Cord Lock Stopper,Elastic Cord Stopper,Metal Cord Stopper Guangzhou Sanko Button Co Ltd , https://www.skbutton.com