Abstract: For a long time, “the basic value” and the pricing mechanism of gold have been a difficult problem in the financial market. This paper establishes a supply and demand model of “non clearing market” to discuss this issue. The results indicate that the supply mechanism of gold involves the supply side; the demand side involves not only the peoperty of gold as an ordinary commodity but also the property as a financial product. Under certain conditions the market can not be clearing, but both supply and demand can determinethe “the basic value” of gold. The real price of gold fluctuates around the “basic value”, while the “basic value” changes as the economic environment changes. The central bank of China should plan ahead to increase the gold reserve reasonably in good time. At the same time, the Chinese government should strenthen its discourse power in gold pricing; only in this way can it guarantee its active position in the international financial market, and finally realize RMB internationlization.

Key words: gold price; state-space model; basic value; non clearing market