[Getting Started with Gold Investing] Hedge Insurance Necessary? What factors affect the price of gold?
Gold Price Today
Today's latest gold price is available for referenceHong Kong Gold and Silver Trading Centre WebsiteThe latest gold trading price for the day is displayed.
Today's Gold/USD Price
GOLD FUTURES MAJORS PRICE TODAY
Gold Price Trend Analysis
Macroeconomic and Policy Implications:
US Election Impact: Trump was again elected to drive market expectations for higher inflation, leading to a stronger dollar and rising bond yields, which put pressure on gold prices in the short term.
Fed policy: The continuation of the rate cut cycle helps support gold prices, but rising inflation could lead to expectations of rate hikes, and gold prices are likely to be pressured.
Geopolitics and the Need for Avoidance:
Situation in Russia: Recent geopolitical tensions, such as the conflict between Russia and Ukraine, have intensified the market's risk-averse sentiment and increased demand for gold.
Global central bank buyers: The continued increase in gold reserves by several central banks, especially in Southeast Asian countries, supported gold demand in the long run.
Market capital flows to cryptocurrencies:
Gold funds have seen capital outflows, with some speculative funds flowing into cryptocurrencies such as Bitcoin rising significantly in recent times; plus, the market's expectation of reduced cryptocurrency regulation has also attracted speculative demand for some gold.
Factors affecting the price of gold
The Brighton Forest system collapses and gold prices begin to float freely. This historic shift makes gold prices more susceptible to market demand and other economic factors.
What affects the price of gold? | ||
Factors affecting the price of gold | ties | reasons |
inflationary | Proportional ratio | Inflation pushes up prices, stimulates gold demand, prompting gold prices to rise |
USD Value | Counterbalance | Gold is measured in dollars. The rise in the dollar does not affect the value of gold itself, but favors the investment of other assets, yields more, reduces the demand for gold, and the price falls accordingly. |
Monetary Policy | Right or wrong | Gold is used to resist inflation, so when interest rates rise, the price of gold falls; vice versa, when interest rates decrease, the price of gold rises. |
Avoidance requirements | Proportional ratio | Market volatility or geopolitical influences increase the need for hedges, driving gold prices higher. |
Merchandise Requirement | Proportional ratio | Gold prices generally rise as the market demands for jewellery increase. |
Central government policy | Proportional ratio | When central banks buy gold in bulk to strengthen economic stability, better risk management, and diversify reserves, gold prices rise. |
The relationship between the price of gold and the level of inflation
The price of gold is proportional to the level of inflation. When there is inflation, the price of gold will follow the rise. As inflation causes prices to rise and currencies to depreciate, and gold is recognized as a tool to hedge inflation, investors' demand for gold increases, driving gold prices higher.
The relationship of the price of gold and the dollar index
There is an inverse relationship between the price of gold and the dollar index. When the dollar index rises, the price of gold usually falls; when the dollar index falls, the price of gold may rise.
This is based on the following 4 big factors:
Gold has hedging properties: Gold is considered a safe haven asset by the market, especially when investment markets are unstable, inflation rises, or the dollar weakens, investors may divert gold to protect their assets, driving up demand for gold and prices.
GOLD TRADES IN USD: WHEN THE USD INDEX RISES, IT MEANS THAT THE DOLLAR IS IN A STRONG PHASE, WHICH MEANS THAT THE COST OF BUYING GOLD IN OTHER CURRENCIES INCREASES, REDUCING THE DEMAND OF NON-US REGIONAL INVESTORS, CAUSING GOLD PRICES TO FALL.
Interest Rate Impact: A rise in US interest rates will generally strengthen the US dollar. At this time, investors tend to choose assets with higher interest rates for higher profits and increase the opportunity cost of holding gold, thereby depressing gold prices.
Market sentiment: Changes in the dollar index often reflect the market's risk preference. When market sentiment is upbeat and the dollar index rises, investors may choose riskier assets such as stocks rather than hedge assets such as gold.
The relationship of the price of gold and the US interest rate
The price of gold is also contrasted with the US interest rate. That is, when US interest rates rise, the price of gold tends to fall; and when interest rates fall, the price of gold usually rises because:
1. Opportunity Cost
Gold does not generate interest or dividends, so when interest rates rise, investing in other assets (such as bonds or deposits) or earning higher interest increases the opportunity cost of holding gold, reducing the demand for gold.
2. Weak dollar
A rise in US interest rates usually leads to a stronger dollar. Because gold is priced in dollars, dollar strength causes investors in other currency areas to buy gold to increase the cost of gold, thereby suppressing gold demand and prices.
3. Inflation Expectations
Low interest rate environments are often accompanied by rising inflation expectations. While inflation depreciates the dollar, investors may be more inclined to buy gold as a safe haven asset to protect its value. Conversely, investor demand for gold may decrease when interest rates rise, which often indicates a reduction in inflationary pressures.
4. Market sentiment
The change in interest rates reflects the market's view of the economic situation. When markets expect strong economic growth and rising interest rates, investors are more likely to choose riskier assets rather than hedge assets such as gold.
5. Central Bank Policy
The interest rate decisions of the US Federal Reserve (Fed) have a significant impact on gold prices. When the Federal Reserve raises interest rates, gold prices are depressed and interest rate cuts support gold prices.
What are the benefits of investing in gold?
Avoidance Assets
Because gold has always been regarded as a reserve asset, its value remains stable over the long term, so investors often turn to gold to preserve the value of their assets when the economy is unstable, inflation rises, or market volatility increases.
Anti-inflation
The value of gold typically rises as inflation rises, so it is considered an effective hedge for inflation. The value of gold tends to remain stable when currency purchasing power decreases.
mobility
Gold is a universal global asset that is easy to buy and sell. The market also offers a variety of forms for investors to invest in gold, including physical gold (such as bars, coins), gold ETFs, and gold stocks for easy trading.
Global demand
Gold has a certain amount of demand for jewelry, electronics, and industrial uses, which makes its value relatively stable.
How to invest in gold
Gold investments can be divided into investing in physical gold or investing in gold concept stocks and related derivatives (such as gold ETFs, gold futures, etc.):
1. Real Gold/Paper Gold
Invest in physical gold, i.e. buy spot gold instruments such as bracelets, necklaces, earrings, gold, gold beads, gold bars, gold coins, etc. However, because it is not convenient to invest in physical gold and requires a certain amount of storage space, the investment costs are higher; paper gold is the method of investing gold through a bank account. Like a regular bank savings plan, record how much gold is in the accounts with a “bookie”.
pros | shortcomings |
Low entry threshold For example, Hang Seng Paper Granules, the entrance fee can be as low as HK$1,500. | No interest income+deposit protection |
In addition to buying and selling physical gold and paper gold, consider investing in the following ways:
2. Gold Concept Stocks
Gold Concept shares are listed companies focused on gold mining, processing and sales. Gold stocks are directly related to gold market dynamics and their performance is often related to international gold price interest rates. By investing in gold concept stocks, you can participate in the gold market without holding physical gold.
pros
The rise of gold concept stocks is greater than that of gold
shortcomings
Fluctuations greater than gold
Declining resources of mining, high mining risk, or impact on company profitability
Gold stocks on the Hong Kong stock market | |
|---|---|
00340 | Tongguan Gold（ $TONGGUAN GOLD(00340.HK)$ ) |
02489 | Seas Resources ( $PERSISTENCE RES(02489.HK)$ ) |
00815 | China Silver Group $CHI SILVER GP(00815.HK)$ ) |
01818 | China Gold Mining ( $ZHAOJIN MINING(01818.HK)$ ) |
03330 | Lingbao Gold ( $LINGBAO GOLD(03330.HK)$ ) |
00274 | Revival Asia ( $RA SILK ROAD(00274.HK)$ ) |
02099 | China Gold International $CHINAGOLDINTL(02099.HK)$ ) |
02899 | Purple gold mining ( $ZIJIN MINING(02899.HK)$ ) |
01787 | Shandong Gold（ $SD GOLD(01787.HK)$ ) |
Filtered time: 2024/12/24 Filtering conditions: Futubull -Shareholder-Hong Kong Stocks-Conceptual Block-All Gold Stocks | |
Gold stocks on the US equity market | |
|---|---|
KGC | Kinross Gold ( $Kinross Gold(KGC.US)$ ) |
GOLD | Barrick Gold ( $Barrick Gold(GOLD.US)$ ) |
BTG | B2Gold（ $B2Gold(BTG.US)$ ) |
C.D.E. | Coldalene Mining ( $Coeur Mining(CDE.US)$ ) |
NEM | Newman Mining ( $Newmont(NEM.US)$ ) |
IAUX | I-80 Gold（ $I-80 Gold(IAUX.US)$ ) |
FSM | Fortuna Sølv Mines（ $Fortuna Silver Mines(FSM.US)$ ) |
IAG | Iamgold（ $Iamgold(IAG.US)$ ) |
NGD | New Gold（ $New Gold(NGD.US)$ ) |
HMY | Harmonie Gold ( $Harmony Gold Mining(HMY.US)$ ) |
Filtered time: 2024/12/24 Filtering conditions: Futubull-Shareholder-U.S. shares-Industry block-Gold, pre-IPO 10 | |
3. Gold ETF
Gold ETFs are open-ended funds listed on stock exchanges that primarily invest in gold-class assets such as physical gold or gold derivatives:
pros | shortcomings |
Low Investment Threshold | Trading has a time limit |
Easy way to invest Get started with one app | Operated by a fund company, additional charges may affect earnings |
Flexible operation Real-time trading, free application and redemption |
Gold ETF VS Physical Gold
Which is better to invest in gold? Gold ETFs have the following obvious advantages.
GOLD ETF VS GOLD MINES ETF
When considering investing in gold ETFs, you need to know that there are two types of invested gold ETFs based on the tracking target and the underlying asset:
Gold ETF: This type of ETF is directly linked to gold market prices and its performance closely reflects the price movements of physical gold. Through this ETF, investors can participate indirectly in the gold market without actually holding gold.
Gold Mining ETF: This ETF invests in the stocks of gold mining companies. Its performance is influenced not only by the price of gold, but also by factors such as the operating condition of the gold mining company, management efficiency and so on.
What are Gold ETFs? How to choose?
[Gold ETF] Gold Price Surges, Full Analysis of Hong Kong and US Equity Gold ETF Investments
4. GOLD FUTURES
Each gold futures contract usually represents a certain weight of gold, such as 100 ounces. Investors can trade only a portion of the contract value (i.e. margin) and leverage leverage to increase potential returns. While each futures contract has a specific expiration date, investors need to decide whether to close the position (close the trade) or physical delivery before maturity.
pros | shortcomings |
Leverage effect Just pay the margin and get a chance to get a higher potential return | Trading has a time limit Futures contracts have an expiration date, and investors need to make decisions within a specified period |
High liquidity Gold futures are actively traded in the market, often with high liquidity, which is favorable for buying and selling. | High risk The market is influenced by various factors, with high price volatility; Complicated operation, unfavorable for beginners Leverage effect, potential losses are magnified |
How to invest in gold?
Futu Securities offers gold ETFs, gold mineral stocks, gold futures and investment products, is open now and can enjoy the new customer bonus of up to USD. Click on the below image to learn more>>
How to Invest in Gold ETFs with Futuity
Open Futubull, click on the market, and select ETF in the top navigation;
On the ETF page, click the arrow to the right of the “Topic ETF” column to view more topics;
Select “Gold ETF” to see a list of specific ETFs;
You can also enter the list in order of conditions such as depreciation, turnover, market capitalization, etc.
Click on an ETF to access the detailed quotation page, view its “Brief” and “Ingredients”.
