Research On The Influence Of China’s Monetary Policy On Gold Price

Gold is one of the most concerned commodities,and its price also reflects the economic and financial situation.The diversity and uniqueness of its value are remarkable in the financial market.A country’s monetary policy will affect the money supply and liquidity,and will inevitably affect the gold price.Since September 2018,the price of gold has once again opened a path of substantial increase,and it is worth noting that China has been reducing the reserve ratio and releasing liquidity since 2018.On the other hand,China’s RMB internationalization has also made great achievements.Therefore,based on the above observations and considerations,this paper will make an in-depth study on the impact of China’s monetary policy on gold price.The main content of this paper is divided into two parts,one is the theoretical explanation of the problem,the other is the empirical analysis using the econometric model.In the aspect of theoretical explanation,the paper studies the influence of the important objectives of monetary policy,such as money supply,benchmark interest rate,inflation rate,etc.on the price of gold,and analyzes them through commodity market and asset market respectively.In addition,this topic also focuses on the response of gold to monetary policy in different market conditions,so it involves monetary asymmetric effect and investor sentiment in theory.In addition,it also introduces the achievements of RMB internationalization,which provides some support for the establishment of this issue.In the empirical process,this study chooses ms-var model to divide the gold price into three states: up,down and stable.We use M2 supply,Shibor 7-day lending rate and deposit reserve ratio as explanatory variables to analyze the gold price.The emphasis of the demonstration is the regression parameter explanation and the three zone impulse response chart analysis.The empirical results show that the money supply is positively correlated with gold price in general,and the interest rate,reserve ratio and gold price are negatively correlated in general.In addition,when the gold market is in a stable state,it is the least sensitive to the impact response of monetary policy changes,while when it is in a rising and falling period,it is much more sensitive to the impact response of monetary policy changes than in a stable state.More obviously,the response of gold market to the impact of China’s monetary policy will last for a long time.It is further found that tight monetary policy can lower gold price more when gold price is down than when it is up,and loose monetary policy can push gold price higher when gold price is up than when it is down.Finally,after the end of the overall process of exploration,we get the corresponding conclusions,and provide some suggestions,in order to expect gold investors to be more rational and obtain higher returns,and hope China’s RMB internationalization process to achieve greater results.