Should I buy gold at the bottom now? It is said that buying gold in troubled times, the conflict between Russia and Ukraine is chaotic enough this year, but the international gold price has plummeted to almost 20% in the past six months. On September 27, it fell to the lowest level in the past two years, which made many people hesitate whether to buy at the bottom. At the same time, the domestic gold price is as stable as the international one. Does gold have the risk aversion attribute?
First, let’s take a look at the bizarre trend of international gold prices in the past six months. This year, the gold market overall is in a trend of rising and falling back to . In the first few days of the conflict between Russia and Ukraine, the international gold price once surged from US$1,800/ounce to US$2,000/ounce. Then it started to fall sharply on March 9th, and until now, the gold price has basically hovered around $1,660 per ounce.
So why did gold fall like this? There are two main reasons, and without exception, they are all related to the United States. The first point is . The Federal Reserve raises interest rates . Gold and the US dollar are negatively correlated. Both of these are important reserves of major central banks. If the US dollar depreciates, central banks of other countries will buy a large amount of gold to reduce the proportion of US bonds and the US dollar to avoid damage to their foreign reserves. Therefore, generally speaking, gold will rise when the US dollar falls, and now it is just the opposite.
This year, the Federal Reserve In order to push the high inflation in the United States back to the 2% level, the interest rate hike adds the gold market to support the US dollar to strengthen step by step, which led to a decline in international gold prices. Moreover, the Fed is determined to raise interest rates, which means that gold prices will be suppressed for a considerable period of time.
Another reason for the decline in gold prices is that Western countries generally have austerity policies, which trigger expectations of economic recession. The Federal Reserve's interest rate hikes have led to the central banks of other countries being forced to follow up interest rate hikes. In such an environment where most major economies in the world implement monetary tightening policies, everyone's foreign trade is not very prosperous and gold is difficult to rise. Therefore, it can also be said that the rise and fall of gold prices is currently the United States has the final say.
International gold prices plummeted, why do domestic gold prices look quite stable? Let’s take Shanghai as an example, China Times conducted an offline survey. On September 30, the 999 gold in several gold stores was still around 500 yuan per gram, the jewelry gold in a certain store was 497 yuan per gram, and the investment gold bar was 447 yuan per gram, and it was 50 yuan more expensive than the gold bars in the bank. This price is already cheaper than before, but the clerk said it will not be much cheaper.
Domestic gold prices are indeed stronger than international this year, mainly because of the currency denomination. International gold prices have fallen, but the RMB has also fallen relatively largely. If it was last year, when the RMB exchange rate against the US dollar was about 6.5, the domestic gold price was around 450 yuan/gram, and the decline would be a little noticeable. But now the RMB exchange rate has fallen below 7.1, so the domestic gold price is still above the level of 500 yuan/gram. In particular, there is a problem with processing fees for gold jewelry. This thing basically only increases but not decreases, so the domestic gold market is still in a very stable state overall.
So is it a good opportunity to buy gold at the bottom? When buying at the bottom, you must first see the bottom, but as mentioned above, the Fed's interest rate hike has greatly affected the international gold price. If it does not stop raising interest rates, gold will continue to fall. This year, the Fed raised interest rates by 5 times, which totaled 300 basis points, and it is expected that it will add another 125 basis points before the end of the year. Judging from the dot map , the interest rate cut node will only be ushered in 2024. From this point of view, it is not recommended to buy gold at the bottom, otherwise it is easy to buy gold like the Chinese aunts fighting for , Wall Street in 2013, but they can't get it out for several years.
In addition, the US economy has now fallen into a technological recession. If it is completely recession, it is very likely that inflation expectations will immediately become deflation expectations, which is not a good thing for gold prices to rise. Deflation means that currency has the most purchasing power of , and it is better to hold cash directly than to buy gold. In general, if we are for practical value, we don’t have to consider that much when buying some gold jewelry, but if we buy at the bottom of the investment, we should still be cautious.
