Be alert to the negative impact of the continued rise in international gold prices

Recently, the international gold price continues to rise, and the spot gold price continues to refresh the record high. On April 8, the international gold price once again hit a record high, reaching a maximum of $2353.79 per ounce. As of press time, the intraday price of spot gold was $2,340.10 per ounce.

The international gold price continues to rise, is the result of multiple factors. The author believes that there are the following main factors.

On the one hand, gold purchases by global central banks have been an important driver. Because the United States has abused the dollar and weaponized the currency, damaging the status of the dollar as an international reserve currency, central banks have increased their gold reserves in order to reduce their dependence on the dollar. This trend has continued to strengthen in recent years, especially in the first three quarters of 2023, when the amount of gold reserves held by global central banks rose significantly. According to the survey, most central banks believe this trend will continue over the next 12 months.

On the other hand, the Federal Reserve's monetary policy has also influenced the trend of gold prices. When the market anticipates that the Fed may cut interest rates, the dollar weakens, which in turn drives gold prices higher. In recent years, due to the impact of the Silicon Valley banking crisis and other factors, the market's expectation of the Federal Reserve's interest rate cut has been increasing, which has also pushed up the gold price to a certain extent.

In addition, geopolitical risks and international tensions are also important reasons for the rise in gold prices. For example, the risk of renewed geopolitical conflicts, the United States sovereign debt risk is still, etc., which makes the market demand for safe havens increase, thus promoting investors to buy gold.

At the same time, some macroeconomic factors will also affect the gold price. For example, the rate of inflation, the price index, etc., all affect the purchasing power of a country's currency, which in turn affects the price of gold.

These factors interact and together push up the price of gold. However, it should be noted that the continuous rise of the international gold price may indeed bring a series of negative effects, which need to cause our vigilance.

First, higher gold prices could lead to a reduction in consumer purchasing power. Since gold is an important consumer commodity, especially in the fields of jewelry, jewelry, etc., its price increase will directly increase the purchase cost of consumers. This may lead to some consumers to reduce purchases, causing an impact on related industries, thus affecting the stability of the entire consumer market.

Second, rising gold prices could exacerbate the gap between rich and poor. Gold is often seen as a symbol of wealth, and a rise in its price will further increase the wealth of wealthy people who own gold. For those who own little or no gold, they may not be able to share in the benefits of higher gold prices and may face greater financial pressure due to the rising cost of living. This widening gap is likely to exacerbate social inequality and instability.

Third, the rise in gold prices could also have adverse effects on the global economy. The volatility of the gold price is closely related to the global economic situation, and the continued rise of the gold price may trigger inflationary pressure, which in turn poses a threat to the economic stability of various countries. In addition, higher gold prices may also lead to changes in the global trade balance, which will have a negative impact on international trade relations.

Finally, we should also be alert to the risks of excessive speculation and bubbles. In the context of rising gold prices, some investors may blindly follow the trend and over-invest in the gold market, leading to the generation of market bubbles. In the event of a market correction or crash, these investors could suffer huge losses and even set off a chain reaction that would send shockwaves through the financial system.

In general, although the international gold price continues to rise, it has brought certain investment opportunities and wealth appreciation effects, but it must also be vigilant about its possible negative impact. We need to pay close attention to the trend of the international gold price, strengthen international cooperation, and take corresponding measures to deal with its possible negative impact.