Forex Sky Eye APP News: The global COVID-19 epidemic has spread, impacting the economic outlook, and the market is worried about recession. Recently, the global financial market has entered a mode of selling everything: stock market, crude oil, gold, treasury bonds and other assets! Panic selling swept the world, as if it was a situation of a major financial crisis... But this time, it seems different!
Foreign exchange information website Dailyfx wrote an article pointing out that the "panic index" - the Chicago Options Exchange (Cboe) Volatility Index (VIX) hit a new high of 84.83 since the 2008 financial crisis on March 17.
combined with past experience, if the index is higher than 35, risk aversion will completely dominate the market. US stocks experience a plunge or even collapse: if the index rises above 55, the US stocks will be in a state of collapse. If the index rises above 80, it means that the market is in a financial crisis.
At present, the "Panish Index" VIX has slightly declined from above 80, and judging from the performance of major financial markets, the financial crisis has broken out. In this regard, some institutions analyzed that during the past many financial crises, gold initially plummeted due to the liquidity of the US dollar, but gold prices often interpreted a V-shaped reversal after countries started to rescue the market.
However, some analysts believe that the situation of this financial crisis is different from the past. Simply put, most of the past financial crises were the bursting of bubbles caused by excessive financial leverage, which in turn triggered financial and economic crises. This financial crisis was caused by public health incidents to worry about the economic outlook, thus piercing the huge bubble in European and American stock markets.
Although the economic growth of Europe and the United States has not been strong since the financial crisis in 2008, the three major U.S. stock indexes have soared several times or even 10 times since their lows in 2009. In other words, the growth of the stock market is far from economic fundamentals, and the central bank's continuous printing of money has caused the bubble in the financial market to continue to expand.
The ammunition of central banks in developed countries and regions has been almost exhausted in the past 10 years, and the Federal Reserve has almost exhausted all the bullets in the past half month. It will be difficult for the market to obtain more support and confidence from monetary policy.
Even if countries work hard to introduce various fiscal policies, the problem is that global supply chains and economic activities in various countries have been greatly impacted by the epidemic, and it is still unknown when they will return to normal.
Obviously, this is not a problem that monetary policy and fiscal policy can solve. If the epidemic is not controlled, the economy will fall into recession, materials will gradually be in short supply, and demand for US dollar liquidity will increase. Therefore, it is difficult for the stock market to truly bottom out and rebound, and gold will also face more selling due to cash flow demand.
In short, the effectiveness of the rescue of European and American governments and central banks this time will be greatly reduced due to the epidemic. Liquidity is scarce may be a problem in the future. In the environment where cash is king, gold will be difficult to win the favor of investors.
Technically, the four-hour chart pattern of gold shows that after falling below the wedge lower track and the neckline of the head and shoulders top, the price continued to fall sharply, and fell to 1451 on March 16, and then experienced a roller coaster market and rebounded to the highest level of 1554.
is currently under a lot of pressure above, and 1550~1564, 1600~1607 will all constitute an upward obstacle. If the above resistance area cannot be exceeded, the situation will still be beneficial to the bears. If the decline is sharply below 1450, the decline space will be further expanded. If the market rebounds sharply in the future and rises beyond the 1600~1607 area, there is a possibility that this round of decline will be stopped and the bulls are expected to gain more momentum.
In addition to the intensified concerns about the economic outlook caused by the new coronavirus, the crude oil price war launched by Saudi Arabia also seriously impacted market confidence: during the European session on Wednesday, oil prices collapsed again - US oil fell by more than 10% again, falling below the $24 mark, and Brent crude oil fell below $27/barrel, a new low since November 2003, and fell by more than 6% intraday.
Latest news pointed out that the Saudi Ministry of Energy said it directed Saudi Aramco to continue to supply crude oil at a level of 12.3 million barrels per day in the coming months. Previously, OPEC+ talks on deepening production cuts collapsed, and Saudi Arabia launched a full-scale crude oil price war, which completely collapsed oil prices! The collapse of crude oil demand caused by the epidemic and the increase in supply from the world's largest oil-producing countries continue to lower oil prices.Stephen Innes, a market strategist at Asia Pacific at
AxiCorp, said that the peak of demand collapse has not yet reached, and oil prices are expected to fall to $18 to $20 a barrel. Bank of America Merrill Lynch said that as crude oil inventories increase, WTI crude oil futures premium may expand, WTI crude oil prices and Brent crude oil prices may turn into a positive price spread, and oil prices may fall below $20 per barrel.
