With spot gold recently hitting an eight-year high, spot gold has just pierced the $1800.00 / oz mark, the latest at $1800.02 / oz, and the daily chart is up 0.29%. The main force of Comex gold futures is up 0.10% at $1811.70 / oz.

News since the beginning of this week has also shown that global monetary policy designated authorities, including the Bank of Japan and the European Central Bank, intend to maintain considerable easing in the context of uncertain prospects for the mitigation of the epidemic, which makes it widely expected that gold continues to strengthen.

Next, the short-term gold price will rise again, challenging the record high of $1920 in 2011, and a number of institutions in the industry have predicted that it is only a matter of time before the gold price reaches an all-time high, and there is even a chance to touch the $2000 mark by the end of the year.

According to historical data, compared with previous gold bull markets, the current gold bull market is up only 69%, while most gold bull markets are up more than 400%. Although the relatively high price of gold means that history may not repeat itself, large global government stimulus packages, negative interest rate policies, deflation and stagflation trade and ETF inflows continue to hit new highs, which will continue to support gold prices in the future, so there is still room for gold to continue to rise.

At the same time, although the current gold-silver ratio is still too high, considering that silver is dragged down by industrial attributes, the gold-silver ratio is likely to trade in a higher range for a long time.

The following chart shows the previous major bull market in gold. With the exception of 1930-1934 and the current gold bull market, gold has risen by more than 400% in other waves. With January 2016 as the current low of the gold bull market, gold has risen 69% from its low. Because of the current relatively high price of gold, the previous history of 400 per cent rise may not repeat itself, but it is important to understand the current factors driving the price of gold.

What drives the gold market higher?

At present, there are several major economic factors driving gold up.

1) large-scale stimulus packages of global governments

This leads to the devaluation of the currency. So far, the global fiscal policy response to the epidemic is US $9 trillion and is likely to climb further. This supports stored-value assets such as gold.

The chart below shows the strength of fiscal policy in the world's major economies. Fiscal policy is expressed as a percentage of national GDP.

2) negative interest rate Policy (NIRP)

Around the world, while central banks cut interest rates, yield-hungry investors called for bond trading with reasonable yields. This pushed up bond prices and depressed bond yields.

Low interest rates discourage investors from investing in government bonds and force them to look elsewhere for safe-haven assets such as gold.

The chart below shows government bond yields around the world.

It can be found that European government bond yields are basically negative. Yield-hungry investors and the central bank's negative interest rate policy have pushed most government bond yields into negative territory. Bond yields in other developed countries also follow.

Such low interest rates have brought the total amount of negative-yield bonds to levels we have never seen before. In the past five years, global negative-yield debt has soared from zero to more than $12 trillion.

3) Trade of deflation and stagflation

Weak productivity and GDP, high unemployment and the high cost of commodities (food, water, housing) are causing investors around the world to buy gold, a safe haven asset as a store of value.

The International Monetary Fund (IMF) expects the economy to fall into a deep recession and the pace of recovery will slow. In its latest review on June 30th, IMF cut its forecast for global GDP to-4.9%.

More worryingly, the IMF forecasts the economies of powerful developed countries such as the US and Germany to contract by 8 per cent. In addition, the International Monetary Fund estimates that global business losses will exceed $12 trillion.

The following is the 2020 forecast for the major economies.

4) ETF inflows continue to hit new highs

Gold ETF has recorded record inflows for weeks as investors clamor to buy the metal.

As ETF creates new units (each supported by gold), this will continue to drive demand for gold ETF.

What's the next step for gold?

There is no sign that central banks around the world will slow down the pace of printing money, nor do they see any central banks in the developed world capable of raising interest rates. Devaluation provides a solid long-term argument for gold.

However, gold needs to consolidate near the current price level to get stronger support before it can rise further.

Can silver catch up with the rise of gold?

With January 2016 as the start of the bull market, silver lagged far behind gold. The chart below shows that silver is up only 30% compared with January 2016, while gold is up 67%.

This led to a record gold / silver ratio.

But there is no need for the market to stick to the gold-silver ratio, because there are many factors that may change the range of this ratio.

In recent decades, for example, the ratio of oil to gas has been fixed at 6:1 because pricing is based on energy equivalent. But the American shale oil revolution has changed that, and that ratio has changed since the surge in shale gas production in 2007.

Silver is an industrial metal with some risk aversion properties. At the same time, silver is associated ore, that is, the by-product of the mining of other metals, which is also its main source, the output of primary silver ore is very small.

So the global slowdown does not bode well for industrial metals. Silver can be partially supported, but gold may be the main battleground for safe-haven funds, and this trend will continue for some time in the future.