Although the recent trend of gold is still slightly weak, market participants pointed out that with the recent US stock market crash, US investors have begun to buy gold to hedge, which means that the safe-haven role of gold will begin to appear. At the same time, the Fed's position of continuing to raise interest rates may accelerate the risk of the yield curve upside down. In addition, the recent surge in demand for gold in the market and the expansion of gold purchases by central banks will lead to further rebound.
Although the recent trend of gold is still slightly weak, market participants pointed out that with the recent US stock market crash, US investors have begun to buy gold to hedge, which means that the safe-haven role of gold will begin to appear.
At the same time, the Fed's position of continuing to raise interest rates may accelerate the risk of the yield curve upside down. In addition, the recent surge in demand for gold in the market and the expansion of gold purchases by central banks will lead to further rebound.
In addition, in the case of the US stock market crash, the trend of gold stocks is still strong, which is similar to the situation during the 2008 financial crisis, when gold was one of the best performing assets in the market, which hinted at the possibility of further gold strength.
The stock market fell, the rebound of gold stocks reflected the market risk aversion
The last recession can be traced back to 2006 to 2010, one of the best performing assets is gold.
This is driven by risk aversion. Due to the good performance of US stocks in 2001, the market is satisfied with the return on investment in the stock market, resulting in a large number ofCash flowInto the stock market. However, as the stock market fell, investment income was diluted or even began to lose money, and the market risk aversion began to appear, thus increasing the attractiveness of gold.
However, the performance of the stock market and gold are not exactly the opposite. The rise of gold will often lead to the rise of gold stocks. Therefore, during the last recession, we can see that Newmont Mining Company still has a continuous rise.
Newmont Mining, although in 2008Global stock marketIn the case of a plunge, there was a sharp drop, but it was still able to quickly rise to a high level, showing strong resilience.
At the same time, Royal Gold performed better. From 2007 to 2010, it showed a rising trend, showing the opposite trend of other stocks.
This also indirectly indicates that in the unstable period of the market, the purchase of goods may be more stable than the purchase of gold mining stocks.
Therefore, it may be more intuitive to track gold funds that are closer to gold prices under current conditions.
Here is a quote from the SPDR Gold Fund. It can be seen that the fund has shown a relatively strong upward trend during this period.
Dempster, managing director of the World Gold Council's Central Bank and Public Policy, pointed out that this trend seems to have begun to appear again in the near future, and the intensity of market purchases has indeed accelerated and expanded. Gold stocks Newmont has risen nearly 7% in the S&P 500 since the beginning of October.
Gold has recently rebounded significantly, while central banks’ gold purchases have increased.
Despite the surge in global uncertainty this year, the bleak trend of gold for most of this year has made investors see it as a useless investment.
But in the near term, gold has begun to show signs of rebound.
Since October, the price of gold has risen by 3.5%. At the same time, the S&P 500 once fell 6.5%.
In times of market turmoil, gold tends to perform very well. Gold is often a very attractive asset, especially when the market is worried about inflation.
Gold is also an attractive asset for central banks seeking security and liquid assets. Data show that central banks' gold purchases in the third quarter increased by 22%, the highest level since the fourth quarter of 2015.
In the past few years, most of the world's gold purchases have been completed by Russia, Turkey and Kazakhstan. Dempster pointed out that the above three countries are major buyers, while India, Poland and Hungary have also begun to expand their purchases. The central bank’s expansion of purchasing has begun to attract investors’ attention.
US investors began to expand gold purchases, meaning that the dollar’s safe-haven properties gradually give way to gold
According to EPFR Global, a fund that tracks the movement of funds from mutual funds, the Commodity Mutual Fund attracted more investment last week, mainly because of the increased demand for gold funds.
Even if commodities that are more sensitive to economic changes do not perform well, such as crude oil and copper, gold still performs well.
Dempster expects the trend of rising gold prices to continue, as the enthusiasm of US investors to invest in gold is still heating up.The World Gold Council reported that demand for gold coins and gold bars in the United States rose by 74% in the third quarter.
Earlier, due to the continuous improvement of the US economy and the fact that the Fed has gradually raised interest rates, the US dollar continued to strengthen, which made the dollar become the main safe-haven species. When there are uncertainties in the market, the market has more choices to flow funds to the US dollar than to gold, which has led to continued pressure on gold prices.
At the same time, the US stock market turned positive and hit a record high on September 21, further strengthening the economic confidence of the US market. As a result, the dollar that was in the decline during the same period was boosted, and it was collected for several consecutive days. Yang has further attracted the influx of international funds.
At that time, market participants explained that although the market for safe-haven sentiment has increased the purchase of safe-haven assets, most of the increase came from Europe. As the geopolitical situation in Europe continues to ferment, the amount of gold purchased in the US has not increased. On the contrary, there has been a decrease, which means that the US dollar will be supported in a short period of time, and the gold will be further weakened later.The hedging property will return to gold only when the gold purchases in the US market rise.
According to the World Gold Council, the volatility of the stock market has caused more and more investors to flock to gold, and any fluctuations in the US stock market in the future will lead to further increases in demand for gold.
The risk of the yield curve upside down reappears, gold still has room for strength
Rabobank stressed that the Fed seems to have ignored the important leading indicator of the yield curve, even though it currently has the risk of being upside down. The bank predicts that the Fed will raise interest rates once in March 2019, but in the second quarter of 2019, as the yield curve reverses, the Fed will end the rate hike cycle.
The bank believes that with the end of the cycle, the United States will begin to experience a recession, which will begin to appear in the fall of 2020, which may support a further rebound in gold.
(Article source: Huitong.com)