What is the long-term trend between gold price and steel price
The impact of the gold crash on steel is mainly reflected in the following aspects:
Market demand:
The improvement of economic expectations drives demand:
the decline in gold prices may imply that the economic situation is improving, investors' confidence in the economic prospects is enhanced, and risk aversion is reduced. This will encourage enterprises to increase investment and expand production scale, and the development of steel downstream industries such as construction and automobile will accelerate, thus increasing the demand for steel. For example, the recovery of the real estate market will drive the demand for construction steel to increase, and the increase in automobile production will increase the demand for automobile steel.
Changes in investment preferences affect demand:
when the price of gold falls, some investors will transfer their funds from the gold market to other fields, and steel-related investment and production fields may attract more funds, prompting steel enterprises to expand production, thereby increasing the demand for raw materials for steel production and promoting the development of the steel industry.
In terms of production cost:
the sharp drop in gold is usually accompanied by changes in the macroeconomic environment, which may change the price of raw materials for steel production. For example, when the economy is expected to improve, the demand for iron ore, coal and other steel raw materials will increase, and the price may rise, thus increasing the cost of steel production; On the other hand, if the economic situation is still not optimistic and the demand for raw materials is weak, the price may fall, reducing the cost of steel production.
In terms of price trend:
Overall commodity market linkage:
As one of the commodities, the price drop of gold may trigger a chain reaction in the whole commodity market. Under the influence of market panic or optimism, steel prices may fall or rise with gold prices. For example, when the price of gold plummeted in 2013, the price of scrap iron in Fuzhou's waste recycling industry also dropped from 2,600 yuan per ton a week ago to 2,200 yuan per ton.
Monetary factors:
The decline of gold price may be related to the adjustment of monetary policy. If monetary policy is loose, money supply increases and liquidity is abundant, it may lead to an increase in inflation expectations, thus pushing up steel prices; On the other hand, if the monetary policy is tightened, the price of gold will fall, and the price of steel may also be suppressed.
Market confidence:
The sharp fluctuation of gold price will affect the confidence and expectation of market participants. If the plunge in gold makes the market think that the economy will be prosperous, the confidence of steel enterprises and investors in the steel industry will be enhanced, enterprises will increase production and investment, and investors will actively participate in steel-related transactions to promote the activity of the steel market. On the other hand, if the plunge in gold causes market panic, investors and enterprises are worried about the prospects of the steel industry, which may reduce investment and production and inhibit the development of the steel market.
