Analysis Of Long - Term Factors Affecting Gold Price

The price of gold is determined by a variety of factors. Supply and demand factors, money supply, economies of scale, inflation, the price of oil, the international political situation, the stock index, long-term bonds, the U.S. dollar exchange rate, interest rate, gold futures prices, etc. In the long term, the price of the gold is determined by gold supply and demand. Let’s look from the demand side, commodity functions demand for gold as jewelry was declining, while investment demand was rising at the same time. Let’s look from the demand side, the growth in the supply of mined gold was relatively stable, while the gold reserves of the central banks was increasing, resulting in official gold sales continued to decline, but would not make a greater impact on the long-term trend of the price of gold.This paper firstly made the theoretical analysis of the various factors affecting the price of gold, and focused on short-term and long-term distinction through historical data factors do, avoid the confusing situation of long-term and short-term impact of factors in other papers. Then, this paper extracted four factors (the amount of money supply, economies of scale, the level of inflation, the price of oil) from other long-term factors though relevant analysis, which is different from other studies.This paper selected the U.S. broad money supply (M2), the U.S. GDP, the U.S. CPI (year-on-year) and the U.S. West Texas Intermediate crude oil price (WTI) as the representatives of the four influencing factors, and gold prices from1978-2011in empirical analysis. In order to avoid multicollinearity among each factors, this paper change the four influencing factors into four components and extract two main ingredients. Because the four components after conversion includes both the information of the four factors and uncorrelated with each other, accuracy has improved to avoid the prediction error.The study shows that:(1) the price of gold itself has strong autocorrelation and inertia on a current price can not be ignored.(2) In the long run, the money supply, the size of the economy and the oil price is an important factors. But at different times, which factor is more relevant to the price of gold. That is depended on the analysis of historical price of gold, and the current changes in the price of gold:the frequent fluctuation range, smooth intervals, interval downturn or rise in the range? When the gold prices were changes fast, the four factors all made effect on future gold prices. ②When the gold price were relatively stable or downturn, inflation factors and the price of gold would make more effect on i future gold prices.③In the period of rapid increases of the price of gold, the broad money supply, the rate of economic development and trend of gold price almost entirely positive correlation.(3) From the data of1978-2011, the current price is the most sensitive of last price, followed by oil prices, the broad money supply and economic situation. The inflation and the long-term price of gold were weak relative compared to several other factors.