Three waves of gold price surge: the dollar crisis hidden behind gold
In the past 50 years, the price of gold has experienced three significant surges, each of which reflected profound changes in the global economic landscape and geopolitics. Gold is not only a precious metal, but also a safe haven that people seek when facing uncertainty. Below, let us interpret the logic behind these three surges in gold prices one by one.
The First Boom: The Collapse of the Bretton Woods System and the Global Crisis (1970s)
In the 1970s, the world saw the first major rise in gold prices. The background at that time was that the United States announced that the dollar would no longer be pegged to gold and the Bretton Woods system collapsed. Without the support of gold, the credit of the dollar was greatly shaken, and countries around the world sold dollars and turned to gold reserves for risk aversion. This period was also accompanied by the Middle East oil crisis and the Cold War tensions between the United States and the Soviet Union. As geopolitical uncertainties intensified, gold became popular as a safe-haven asset, and its price rose sharply.
The second boom: financial crisis and global economic turmoil (early 2000s-2011)
The second surge in gold prices occurred from the early 2000s to 2011. The trigger for this period was the 9/11 incident in 2001, which shook global confidence in the United States, weakened the dollar, and increased demand for gold again. The more important driving force was the 2007-2008 global financial crisis. The subprime mortgage crisis triggered global economic turmoil, and investors flocked to gold for safe havens. During the financial crisis, gold became synonymous with value preservation, and its price continued to rise until it peaked in 2011.
The third surge: the weakening of the US dollar hegemony and the deterioration of the global situation (2022 to present)
In the past two years, the price of gold has soared again. This time, the reason behind it is not only the plight of the US economy, but also the overall turmoil of the global order. The global hegemony of the US dollar is showing signs of collapse:
US debt crisis: The US national debt is as high as 34 trillion US dollars, and the interest payment burden is heavy, with interest alone reaching 1.2 trillion US dollars per year, accounting for about 4% of GDP. This heavy debt burden has gradually weakened the outside world's trust in the US dollar.
Geopolitical conflicts intensify: A series of international crises, such as the Russia-Ukraine conflict and the Israeli-Palestinian war, have occurred frequently, greatly increasing the uncertainty of the global situation. The United States' global control over the years seems to be insufficient, and it is becoming increasingly difficult to maintain the global order.
In this context, many countries around the world, especially China and Russia, chose to reduce their holdings of U.S. debt and instead reserve gold to avoid risks. This led to a surge in demand for gold, pushing its price up continuously.
The hidden dollar crisis: The abnormal relationship between gold and the US dollar
In the past, gold and the US dollar often showed a negative correlation: when economic expectations were good and the US dollar strengthened, gold prices would usually fall; and when economic expectations deteriorated and the US dollar weakened, gold would rise. However, this rule seems to have been broken in recent years. Even though the Federal Reserve has repeatedly stated that it may raise interest rates in the future, which should lead to a drop in commodity and gold prices, the fact is that gold prices are still rising sharply.
Behind this phenomenon, there is actually a crisis of global trust in the US dollar. The status of the US dollar as the world's reserve currency is facing unprecedented challenges, especially in the context of global turmoil and the diversification of the monetary system. More countries choose to conduct currency swaps with major countries such as China and Russia, and use RMB, Euro and other currencies for settlement. This has greatly weakened the global circulation status of the US dollar.
Gold's safe-haven nature: The dollar's confidence crisis emerges
As uncertainty in the global situation intensifies, the credit of the US dollar continues to be questioned. Investors flock to gold for safe-haven demand. The apparent rise in gold prices actually reveals the continued decline in global trust in the US dollar.
In summary, the three surges in gold prices are closely related to global economic and political turmoil. The current rise in gold prices not only reflects risk aversion, but also the shaky hegemony of the US dollar. In the future, as the global situation further evolves, the role of gold may become more important.
Conclusion: Behind the surge in gold prices is the turbulence in the global landscape.
The price fluctuation of gold is not only a manifestation of the financial market, but also a profound change in the global order. For investors, understanding the macro factors behind the price of gold can help them make more informed decisions in an uncertain world.
