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since entering september, the price of gold has hit record highs many times. it has risen by more than 100 us dollars this month. after the international gold price broke through 2,600 us dollars, it hit a maximum of around 2,685 us dollars. its future trend has attracted widespread attention from the market. to understand the price of gold, we not only need to start from direct factors such as supply and demand, but also need to understand it from the logical relationship between the prices of large categories of assets. the author believes that the price of gold has historically been negatively related to the actual yield of the 10-year u.s. bond, but the previous gold price deviated from it, mainly due to the increase in central bank gold purchases and the overestimation of the actual yield on u.s. treasury bonds. gold prices may rise due to unabated geopolitical risks, continued central bank gold purchases, weakening us dollar credit, and falling real yields on u.s. treasury bonds. the negative relationship between the real yield on 10-year u.s. treasury bonds and the price of gold will resume.

theoretical determinants of gold prices

the determinants of gold prices can be analyzed by simulating a market transaction process. if an investor chooses to invest in major asset types, one is to invest in gold, and the other is to invest in the real economy. after settling after a period of time, compare the income difference between the two. . the price of gold is related to risk aversion, assuming that risk aversion is neutral. in addition, judging from past historical data, gold prices have been consistent with the rise in physical commodity prices in the long term.

therefore, the nominal return on gold is equal to the price increase of the commodity, that is, the inflation rate, and the real return is 0. in contrast, when investing in the real economy, the real rate of return is the real gdp growth rate, and the main opportunity cost of holding gold is the real interest rate. this can also be confirmed from past data. the strongest correlation with the price of gold is the actual yield of the 10-year u.s. treasury bond. the two have historically shown a negative relationship. at the same time, according to the aforementioned assumptions, the actual yield of gold is 0. therefore, it has the effect of resisting inflation, that is, the gold price and the inflation rate should logically have a positive relationship.