Тенденции развития совокупного спроса и предложения на рынке золота

Much of the gold market analysis is based on the premise that the number of supply and demand – required quantity, can characterize market supply. The specific causal relationship between these two variables and price is often not mentioned, and probably legitimate: isn't it obvious that the requirement of a greater number is the reason for the price increase, but the increase in supply is responsible?

Side of the supply and demand of the market consists of the scales of supply and demand, not quantities. Price forecast is based on quantities, is a false prediction, because there is no causal relationship between quantities and price.

This error leads the majority of analysts in an obsessive concentration on quantities; this ignores the real drivers of prices.

The gold market is divided into sectors: mining, industry, jewelry, investors, banks. In addition to these sectors, there are also investment, i.e. containing bullion, coins and funds. When we are dealing with normal goods, then, comparing the scale of supply and demand, we draw conclusions about the future of the corridor of the prices. The same isn’t possible, when we are dealing with gold, because market forecasts of gold which are based on its number – is meaningless. Gold is a special asset and approaches to the prediction of pricing are much more complicated. The scales of supply and demand are not scalar values; they can only be observed directly using a gold price at the moment. There is no linear relationship between the market price and the curves of supply and demand. If there is a disproportion, it only leads us to propose to buy gold to bring the portfolios to a state that meets the preferences of investors. Even such an outstanding financier-billionaire George Soros at different times in different ways spoke about gold, the price of this metal and perspectives... In 2013, he suggested that he can predict the price of any asset, but in terms of gold, then he'll pass. Because, many investors were disappointed in gold as a reliable commodity for investment, but Soros, changed his opinion in 2015. He sold the assets for a whopping sum exceeding 1 billion dollars and all this money started to buy gold. Thus, gold is one of the most puzzling assets, operating in a modern economic system.1

When the price of gold rises then it goes without saying that the demand and the price of other precious metals will rise. Investment demand is not stable: the fluctuations in the two years can be 25-27%. Of course, the demand for gold is formed for the purpose of its application, in other words in some periods of time the demand for gold rises or falls in the jewelry industry. Quite apart from this there is either a decrease or increase in demand for this metal in the industry. In principle it does not really matter, as it is bought as an asset and will be further used as needed. Despite the high cost the market of jewelry grows, especially in developing countries, where gold is seen as protection against inflation and where gold is a form of saving. At the same time, the applied high technology in the industry, reduce the percentage of gold in electronic products, but the quantity sold, is growing exponentially. In the near future global development of the global Internet is planned, so it will be available in all corners of the world. Thus, this phenomenon would entail a manifold increase in sales of electronic products, which in turn will require a large amount of gold.

Gold is very different from other commodities; the demand for this metal is not decreasing while the quantity of it is increasing2. The price depends in the jewelry industry, and the demand for bullion coins. Passion of modern banks to buy gold is not a secret. Many powerful banks create reserves based on gold bullion. Of course, this is not their only asset (stocks, bonds, etc.), but the proportion of the precious metal has been increasing recently.

Financial media inform us that the purchase of gold caused the higher prices. But this is only one side of the market. There is a small investor, who bought the party of coins at a very high price, which he was interested in, it does not mean that prices of gold are rising. At the same time there are investors who can't sell gold coins at a high price, and are forced to give at the lowest price. Thus, in the world press we often see biased information about the prices of gold, even if we are informed about one or more transactions with gold at a high price, mass media make far-reaching conclusions about the growth in gold prices, while at the same time the sales of fairly large quantities at low cost are made and a false understanding of the dynamics of prices is made.

Let’s consider the following situation: the demand for gold decreases, and the price is stable. What does it mean? In my opinion this means that gold is an unusual commodity and it is possible that when the demand grows, the price can unpredictably fluctuate around the trend. At the same time the last two years there was a rise in the price of gold and it is difficult to explain, because current main buyers: China and Russia are buying metal from their producers almost not leaving to the world market. Developed countries almost do not buy gold, and some just sell out, as for example in Canada and prices are steadily increasing. We analyze this situation; we hope to find the correct answer: what is the increase or decrease of gold prices at the present time and the foreseeable future? Investors who conduct financial transactions, create a stock of assets consisting of currency, precious metals, blue chips. With the ever changing market situation, they constantly adjust their actions and fight for the most profitable assets, at the same time throwing off low-profit paper. Thus, supply and demand regulate prices automatically.

How do the graphics of supply and demand look like, when we are dealing with gold? There are two theories considering the price of gold depending on supply and demand:

• 1.    Classical theory, which states that the price of the asset depends on the quantity of gold produced at this time, so the amount extracted of the asset directly, affects the price.³

• 2.    The gold that was mined in the annual period, will not affect the supply, so the quantity of the gold mined in a given year. Under the supply of gold,

I mean gold that is thrown on the market. Thus, the number of mined gold is not a supply.

What affects the price of gold on world markets? It depends on the availability of funds which investors are interested in gold, and on the number of counterparties wishing to sell gold while gold prices are formed in such a way that the linear dependence is absent. Purchases of gold will be held as long as investors adjust their portfolios. And this process lasts forever, so, that there will be willing to buy/sell gold, and the price will be adjusted depending on the preferences of the bidders. Many businesses can abandon gold and start to sell it, at the same time, those not invested in gold; you suddenly start to buy it, seeing it as a safe investment at the current moment of time and near future.

An important segment of the trade is the sale of gold coins. The prices change quite often there. This is because some sellers sell the remains of goods at the lowest price, while others sell at high. In the result of superposition of a plurality of financial transactions with each other, the price remains the equilibrium, so it is offset by the large volume of transactions.

Лапидуса. М.:Финансы и статистика.

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"Экономика и социум" №5 (48) 2018