After a lapse of 9 years and 3247 days, the spot gold price once again reached a historical high. The quotes of some dealers have exceeded the historical high on September 6, 2011. The Sina market stood at US$1920.88 per ounce, a sharp increase of 470 from the low point in the year. The US dollar rose by 32% during the year.

　　Higher inflation expectations push up gold prices

　　The direct reason for the rise in asset prices is that there is capital to continuously buy. The same is true for gold.

　　Data from the World Gold Council show that the gold market has attracted a large amount of capital inflows in a short period of time. Take the gold ETF as an example. A year ago, the global scale was only US$118 billion, but now it has almost doubled to US$215 billion.

　　Of the nearly 100 billion U.S. dollars inflows in the past year, about 20 billion U.S. dollars, or one-fifth, came in after June 1.

　　In the first half of this year, the inflow of gold ETF funds also reached 40 billion U.S. dollars, a record high, 8 times that of the same period last year.

　　The reason why funds flow into the gold market is because of investors' bullish thinking. And bullish gold usually means that the market has expectations of higher inflation.

　　After the 2008 financial crisis, in the face of sharp declines in global interest rates and large-scale economic stimulus policies in various countries, investors generally expected super inflation to be imminent.

　　This expectation triggered a big rise in gold. By September 6, 2011, the price of gold rose to an all-time high of around $1920.

　　Callbacks after expectations fail

　　The expectation of super inflation after the financial crisis made gold prices hit a record high, but this expectation at that time did not become a reality later.

　　In 2011 and 2012, the actual rate of return of gold adjusted for inflation was 6%. But between 2013 and 2015, the actual rate of return of gold adjusted for inflation was -38%. By the end of 2015, the price of gold had returned to US$1050 per ounce.

　　Christophe Spaenjers, professor of finance at the HEC Business School in Paris, said that in fact gold does not perform well in hedging inflation. Since 1980, the return on gold prices after excluding inflation has been -0.4%. During the same period, the return on U.S. stocks was 7.9% and the return on U.S. bonds was 6.2%.

　　Spaenjers said that if you look at the inflation-adjusted price, the current gold price will have to return to its historical high in January 1980, and it will have to rise by about 52%.

　　Behind this wave of rising gold prices, Fu Peng, chief economist of Northeast Securities, believes that it is also driven by unusually strong inflation expectations. And whether this expectation will fall in the future depends on the performance of oil prices in the next month.

　　Fu Peng believes that if crude oil encounters a weakening in demand while facing external risk events, the global risk on to off switch must be closely monitored.

　　A weaker U.S. dollar is also supporting gold prices

　　Whether the current strong inflation expectations will be falsified in the future remains unclear. However, another factor, the decline in the US dollar index, is actually supporting the price of gold.

　　The gold price trend is contrary to the trend of the US dollar index. Recently, the US dollar index has continued to fall, especially after the finalization of the EU plan, which drove the euro against the US dollar to rise sharply, causing the US dollar index to fall rapidly.

　　Rising interest rates become the biggest risk

　　All factors that are good for gold are based on the assumption that the current global low interest rate environment remains unchanged.

　　Some commentators believe that this also means that gold, which was once regarded as a hedge against overheated economy, is now being used to bet that the global economy will not return to growth and that central bank interest rates will not rise again.

　　But in the eyes of Suki Cooper, head of precious metals research at Standard Chartered Bank, this is not a certainty. She said that the main downside risk facing gold prices is that interest rates may not remain low for a long time. If the economic recovery is unexpectedly strong, interest rates will be pushed up, thereby hitting gold prices.

　　However, for the time being, the market still chooses "timely pleasure" to push the price of gold steadily higher.

　　Chintan Karnani, chief market analyst at research firm Insignia Consultants, even predicts that the $2,000 mark of gold will be "very easy to break."

　　As an ordinary investor, if you want to be optimistic about this wave of gold prices, in the opinion of Citi analyst Edward Morse, buying gold ETFs is the best way to get the benefits of rising gold prices.