SunSirs: Investment Demand Dominates the Trend of Gold Prices in 2020, and in 2021

1. The upside of gold will narrow

The price of gold rose by 14.64% during the year and the amplitude during the year was 33.94%.

According to SunSirs tracking data, as of December 31, the gold spot price was 392.70 yuan/g, compared with the beginning of the year (01.01) gold spot price of 342.54 yuan/g, an annual increase of 14.64%; compared with the valley value (3.19) gold spot price of 331.75 during the year Yuan/g, an increase of 18.39%; compared with the peak (8.7) gold spot price during the year, 448 yuan/g, a decrease of 12.34%.

In 2020, the spot gold price rose by 14.64% during the year, and the amplitude during the year was as high as 33.94% (the above data is calculated based on the price at the beginning of the year). The monthly price changes of spot gold in 2020 are as follows:

During the year, the gold price trend generally showed a trend of rising first, then falling, and then pulling up again. The downward correction bands were concentrated in mid-to-early March, mid-August, mid-to-late September, and November; the downward adjustment in March was mainly based on epidemic news Under the influence of the impact of the US dollar’s ​​liquidity pressure, assets under the pressure of liquidity have generally fallen. Then, funds have flowed into hedging to protect their value. Gold investment demand has surged, and gold ETF holdings have skyrocketed. On August 7, the price of gold reached nearly 450 yuan/g. At high levels, the early profit-making funds began to take off. In addition to the impact of vaccine news, the US stimulus fiscal deadlock and other factors, gold opened a high callback mode. In December, affected by the news of the new British virus strain, the optimistic expectation of vaccines was greatly reduced. Risks began to rise again.

2. Five-year upward channel, another record high

Looking at the historical price data of gold in the past 10 years, the price of gold is currently at the cycle low point on the upward channel since August 2, 2015. Especially since May 2019, the price of gold has entered a fast upward channel, with the price rising from 280.55 yuan/gram The current price is 392.70 yuan/gram, an increase of 39.98% (based on the gold price on May 1, 2019 as the benchmark price).

At present, the price of gold is 217.10 yuan/g, which is a low level in the past 10 years, an increase of 80.88%; the high for the year is 448 yuan/g, which is a 106.36% increase from the low level in the past ten years.

According to the SunSirs Commodity Index Analysis System, the gold commodity index on December 31 was 104.33, which was 12.34% lower than the highest point during the period of 119.02 points (2020-08-07), and increased from the lowest point of 57.68 points on August 02, 2015. 80.88%. (Note: Period refers to 2011-09-01 to present).

Lengthening the cycle. From the perspective of COMEX gold futures price data, the price of gold has fallen behind the previous peak, and has entered an upward channel in the past five years. It has reached a record high in August 2020. The current price is still relatively high.

3. The decrease in supply in 2020 is mainly reflected in the second quarter

From 2017 to 2020, the global quarterly supply of gold will be between 1028-1265 tons; the annual supply will generally increase during 2017-2019; the second quarter of 2020 will be greatly affected by the epidemic, and the global quarterly supply will drop 15.5 year-on-year %; The global quarterly supply in the third quarter of 2020 decreased by 3.3% year-on-year. In the first three quarters of 2020, global gold supply decreased by 195.24 tons compared with the same period last year, of which the second quarter fell by 188.67 tons year-on-year.

4. Investment demand dominates price trends in 2020

According to data from the World Gold Council, the total global gold demand in the first half of 2020 was 2076 tons, down 6% year-on-year. Among them, the demand for gold bars and gold coins was 397 tons, down 17% year-on-year; the global demand for gold jewellery was 572 tons, down 46% year-on-year; the demand for technology gold was 140 tons, down 13% year-on-year; the net purchase of central banks was 233 tons, A year-on-year decrease of 39%; gold ETF increments were 734 tons.

In the third quarter, the demand for gold bars and gold coins with relative investment demand attributes increased sharply with the rapid increase in the previous gold price. With the help of the money-making effect, the retail investment demand for physical gold in other markets except Thailand surged. The demand for gold bars and gold coins in the third quarter It was 222.1 tons, a year-on-year increase of 49%; in the third quarter, the gold ETF, which is also an investment demand, slowed down due to the late price adjustment factors, with a quarterly increase of 272.5 tons. It was not until November in the fourth quarter that the total global holdings fell for the first time in the year. The holdings were reduced by 107 tons. The increase in gold ETFs dropped from 1022 tons in the previous October to 916 tons, still setting an annual inflow record. The previous highest annual inflow was 646 tons in 2009.

In the third quarter, physical consumer demand remained weak. The demand for gold jewellery was 333 tons, a year-on-year decrease of 29%; the demand for technology gold was 76.7 tons, a year-on-year decrease of 6%; affected by the reduction of 45.5 tons of gold held by the Turkish Central Bank in September, 2020 In the third quarter, there was a small net sale of 12.1 tons of gold demand by global central banks, which was the first time since the fourth quarter of 2010.

The total global gold demand in the first three quarters was 2968.2 tons, of which investment demand accounted for 62% and consumer demand accounted for 38%. The increase in gold ETFs surpassed the consumer demand for gold jewellery and ranked first on the demand list. (See the figure below for demand data and proportions in the first three quarters of 2020)

It can be seen that the influencing factors of commodity gold physical consumption supply and demand factors on gold price trends in 2020 are extremely weak, and the investment demand factors based on anti-inflation and risk aversion currency/financial attributes are completely. 

5. The gold price rises led by financial attributes in 2020 The underlying logic of the market

The easing of global money supply is expected to continue to be strengthened in 2020. The development of the new crown pneumonia epidemic continues to shrink global economic activities. In order to slow down the economic downturn and contain the recession, the world's major economies have relatively abundant money supplies, releasing liquidity on a large scale, and preventing liquidity crises and financial crises. Monetary easing, supply exceeds demand, and inflation expectations strengthen. As an investment product to hedge against inflation, gold is easily favored by funds.

The expected decline in central bank interest rates will continue to be confirmed in 2020, especially the US dollar interest rate. In 2020, the real interest rate of the U.S. dollar will become negative due to inflation and nominal interest rates. Under the influence of the continuous expansion of the Fed's balance sheet and the relative flood of US dollar liquidity, the US dollar exchange rate has depreciated and the US dollar has weakened.

In a general logical sense, the depreciation of the U.S. dollar, the denominated product gold in U.S. dollars, can buy more when purchased in other currencies, which stimulates the international gold supply and demand relationship, and the demand for gold soars, thus driving up the price; The holding of the U.S. dollar increases the holding of gold, leading to an increase in the price of gold.

As an interest-free hedging investment product, gold has a downward interest rate, especially when the real interest rate is negative, the investment value of holding gold is prominent.

Based on the above factors, the market expectations are highly consistent, and the market leveraged trading is superimposed on speculation, and the investment demand for gold has surged.

6. Several reasons why the gold price'^ will operate in 2021

1) Logic layer

The overall global economy is expected to improve in 2021. The OECD forecast in November that the global economy will grow by 4.2% in 2021, and the economy is expected to shrink by 4.2% in 2020. The OECD last released its quarterly forecast in September, when the agency expected the economy to grow by 5% in 2021.

In 2021, inflation expectations may decrease over time. As the only country with a positive annual GDP growth in major economies in 2020, China's monetary policy has gradually returned to normalization. The People’s Bank of China Monetary Policy Committee’s fourth quarter of 2020 (91st in total) regular meeting pointed out that a prudent monetary policy should be flexible, precise, reasonable and appropriate, maintain the continuity, stability and sustainability of monetary policy, and grasp the timing Efficiency and maintain the necessary support for economic recovery. Comprehensively use and innovate a variety of monetary policy tools, maintain reasonable and sufficient liquidity, keep the money supply and the growth rate of social financing scale basically matched with the nominal economic growth rate, and keep the macro leverage ratio basically stable. Domestic CPI data show that China's current inflationary pressure is not large, and it is expected that the monetary policy will be mainly directed toward 'drip irrigation' in the later period.

The depreciation of the U.S. dollar has a bottom, and the Fed has plenty of room for manipulation in terms of interest rates. The United States recently launched the second round of fiscal stimulus plan (Bailout Plan) to emphasize the purchase and distribution of funds for the new crown vaccine. The successful development and promotion of the vaccine will effectively alleviate the continued downward trend of the economy. In 2021, the US fiscal stimulus will gradually decline.

2) Funding layer

When the epidemic subsides, as the economy recovers, risk aversion will gradually fade, capital risk preferences will rise, and the scale of gold holdings will decline as the investment fever of other investment competitors rises. At present, the price of gold is at a relatively high level in history, and the risk of being bullish continues to accumulate over time. Therefore, SunSirs analysts believe that in 2021, the gold price trend will generally show a '^'-shaped operation trend, with the upward space narrowed, the operating range is 350-430 yuan/gram, and the international gold price operating range is 1660-2050 US dollars/ounce.

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