The price of gold has reached a new high. Although there is room for growth, gold is not worth long-term investment?

Wind
Recently, the price of gold has continued to hit a record high, and many analysts believe that the price of gold will not stop there, and there is still room for growth. However, from the perspective of asset investment, gold is not the best investment target, and Warren Buffett once held an evasive attitude towards gold.
International precious metal futures closed up sharply, COMEX gold futures rose 1.94% to $2,301/ounce, COMEX silver futures rose 4.71% to $26.255/ounce.

//Why is the price of gold soaring rapidly? //
Some market strategists said that the US core PCE price index did not rise unexpectedly, or further pushed the gold price to a new record high. According to the FedWatch Tool of the Chicago Stock Exchange, the current market price shows that the probability that traders expect the Fed to cut interest rates in June is 69%, which is higher than 64% before the data was released on Friday.
Gong Ming, a researcher of precious metals in jinrui futures, told the Securities Times reporter that "the intensification of geographical conflicts, the expected transfer of interest rate cuts and abundant liquidity are the main driving forces for the strong rise of precious metals prices in this round. Many investors have been puzzled this year, and it seems that the system of real yield of US debt is no longer effective in gold pricing. But in fact, gold is closely related to the global political environment in addition to liquidity at every stage. "
Cao Liulong, chief strategist of Founder Securities, said that the gold price in the Fed’s "interest rate hike" cycle will generally fall, but the gold price in this round of "interest rate hike" cycle continues to rise sharply, which means that the traditional gold analysis framework is invalid. The acceleration of anti-globalization has led to the expansion of the "dollar credit crack", which is the anchor of the recent "arrogance" of gold prices. Gold is the ultimate "scarce asset", and the price center has begun to move up. Once the petrodollar collapses, it will be difficult to rebuild. In the future, there may be an era of "disputes among countries" without a single reserve currency, and gold is expected to open a decade-old bull.
Yang Hong, a senior researcher at Ping An Futures, said that the short-term gold price was mainly boosted by the safe-haven demand and the Fed’s loose expectations. As the gold price rose, the market gradually digested the Fed’s loose expectations, but the geographical risk and the risk of mine explosion in regional banks in the United States still existed, and the gold price would continue to be supported by the safe-haven demand, so it is expected that the gold price will continue to fluctuate strongly in the short term; In the medium and long term, the continuous purchase of gold by global central banks will bring long-term bullish support to the price of gold.
According to the data of the World Gold Council, in February, the People’s Bank of China announced the purchase of gold for the 16th consecutive month, and China’s official gold reserves increased by 12 tons to 2,257 tons. By the end of February, gold accounted for 4.3% of China’s total foreign exchange reserves, which was higher than 3.4% when the People’s Bank of China announced its re-holding of gold in November 2022. In January, the net amount of gold purchased by global central banks rose from 31 tons to 77 tons, up 192% from last December.
//Gold is not worth long-term investment? //
Tim Hayes, chief global investment strategist of Ned Davis Research, wrote in a recent report that although the current economic situation is favorable for the stock market, "it is more optimistic for gold, and we continue to be optimistic about gold".
However, investment experts say that even if the prospects are good, the role of gold in the portfolio should be completely different from that of stocks or bonds. Because the trend of gold is often different from traditional investment, gold may be an appropriate diversified investment method for some investors, but it should not be regarded as the main component of the portfolio.
Different investors hold gold for different reasons. First of all, gold is famous for maintaining or increasing its value in times of inflation. On the other hand, if paper money depreciates sharply, gold is considered as a store of value. After all, gold has been regarded as a natural currency for thousands of years.
It is widely expected that in the so-called "safe haven" market, the rising price of gold will continue, because investors tend to flee from risky stocks such as stocks to places regarded as safe haven assets, including gold and bonds. This means that investors tend to buy more gold before and during recessions and bear markets.
Ford O’Neill, co-portfolio manager of Fidelity Strategic Real Return Fund, said that for this reason, the recent upward trend of gold is a bit strange. He said: "Since October last year, this is by no means an OTC risk that has prompted the price of gold to rise. I think that there has been a’ rebound of everything’, and obviously quite a few assets have performed quite well. "
Ford O’Neill said that in essence, gold is performing well because investors are pushing up the price of almost everything, from stocks to bonds to cryptocurrencies.
Tim Hayes believes that in addition to the upward trend, the weakening of the dollar and the decline in bond interest rates have also boosted the price of gold. He believes that at lower interest rates, bonds and cash accounts are "less competitive" than gold. As the Federal Reserve is expected to cut interest rates this year, the prospect of gold is becoming more and more optimistic. The lower the interest rate, the lower the opportunity cost for investors to hold gold, and gold does not need to pay interest.
//Buffett used to avoid gold//
As we all know, Buffett, the billionaire investor and chairman of Berkshire Hathaway, has always been evasive about gold.
In his letter to shareholders in 2011, Buffett pointed out that investors can use enough surplus funds to buy all farmland in the United States and ExxonMobil more than 16 times. A century later, one of the options will bring rich crops and sufficient dividends. Another option is just a lot of gold.
In the past 15 years, the annualized return of ETF, which tracks the spot price of gold, was 5.5%, while that of Standard & Poor’s 500 Index was 15.3%.
As for fighting inflation, gold doesn’t seem to be a perfect choice. Although inflation has been stable since 1988, gold showed negative returns in 18 years, including 2021 and 2022.

William Bernstein, the author of The Four Pillars of Investing, recently told the media: "When everything else is in trouble, gold is the only thing that can perform well. When you have a fire, family insurance also has a high return. "
But in the long run, assets will grow at a compound rate and bring returns. Buffett wrote in 2011: "It is true that gold has certain industrial and decorative uses, but the demand for these uses is limited and it cannot absorb new production. At the same time, if you hold an ounce of gold for a long time, you will end up with only one ounce of gold. "
Original title: "The price of gold has reached a new high! Although there is room for growth, gold is not worth long-term investment? 》
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