“We are collecting antiques in prosperous times and buying gold in troubled times.” At present, the supply and demand of the global market are weak. Countries are releasing large amounts of water to ease liquidity tensions and launch strong financial stimulus. There are still many uncertainties about the economic impact of the new crown epidemic. Therefore, gold has become the best choice for hedging and resisting inflation.
On April 9, the Fed launched a rescue plan of US$2.3 trillion to support local governments and small and medium-sized enterprises. On the same day, the international spot gold rose strongly, and after surpassing the $1680 mark, it began to challenge the $1700 mark. At the same time, gold futures once surpassed the $1750 mark.
Gold is a safe-haven asset, and its “fall resistance” has already appeared in the first quarter of this year. The data shows that among the prices of various commodities, the price of gold fluctuated the least, second only to the US dollar and US Treasury bonds.
The World Gold Council believes that as of now, as a source of liquidity and collateral, gold has played an important role in the investment portfolio. In the long run, gold will remain a safe haven. For example, during the 2008 financial crisis, the price of gold has also been adjusted back, falling between 15% and 25%, but by the end of 2008, the price of gold had stabilized and rose, becoming one of the few assets with a positive return at the time. .
Gold coins are out of stock
All along, “Chinese aunt” is bullish on gold. This time, the foreign aunt also shot.
Canadian gold trading giant Kitco recently released a report saying that almost all standard 1 ounce gold coins have been sold out. The American Eagle Gold and Buffalo Gold issued by the US Federal Mint have been sold out. Canadian Maple Leaf Gold, British British Gold, Australian Kangaroo Gold, etc. The most widely circulated gold coins in the world are also sold out.
Apmex, a major US trader, admitted that their Kruger gold coins are no longer in stock. “The stock market is overvalued, and after violent volatility pushes investors to the precious metals market.” Andy Schectman, president of Miles Franklin, a Minnesota bullion dealer, said The violent volatility caused a large number of investors to panic buying gold.
According to market analysts, the out-of-stock gold bars and coins may be the result of violent financial market turmoil and investors pursuing asset security. The interruption of logistics and the suspension of mint production have also affected the supply of spot gold.
Rui Qiang, chief market strategist and head of the research department of the World Gold Council, said that for the practitioners of the gold industry, the bigger problem is that the aviation industry is almost out of service. This makes the transportation of spot gold in various forms very difficult. “In fact, the supply of gold bars is sufficient. The question is how to transport them to places where there is demand.”
Contrary to the situation where foreign gold coins and gold bars are out of stock, the demand for gold coins and gold bars by the “Chinese Aunt” has not been ignited. Domestic gold coins, gold bars and other investment products have sufficient supply, and there is no hot sale situation. However, demand has shifted to online, and the Shanghai Gold Exchange data shows that the daily trading volume of gold contracts Au on the Shanghai Gold Exchange margin trading increased by nearly 200% from early February to the end of the month. Chinese gold ETF holdings also increased by more than 3 tons in February.
Will the price of gold go up?
The gold market is performing strongly, and many analysts have expressed their optimism. “Investors are still uncertain about the recovery of the US stock market; therefore, the potential demand for security still remains in everyone’s mind…” Phillip Streible, chief market strategist at Blue Line Futures, told reporters.
Streible pointed out, “The Fed’s tools are quite limited, and it seems that inflation will continue, which is a big deal for gold in the long run. The Fed said that it is not worried about inflation at the moment. This does open the floodgates for gold. I He believes that gold will be better in the next few quarters.” He expects the price of gold to average $1750 in the second quarter, $1850 in the third quarter, and $2,000 in the fourth quarter.
Suki Cooper, an analyst at Standard Chartered Bank, believes that the demand of retail investors has pushed up prices, and the price of gold will rise further in the short term in the future. He expects the average price of gold to be $1725 in the second quarter. Cooper pointed out that “unprecedented monetary and fiscal stimulus, negative yield debt and a long period of low interest rates mean that gold will continue to attract investors to safe and high-quality assets.”
In fact, for a long time in the past, the price of gold has performed well. From 1970 to 1979, the price of gold rose by more than 1300%, climbing from US$35 to US$512. Over the same period, the S&P 500 index fell more than 50%. Considering the historical performance of gold, a balanced investment portfolio should include 10% to 20% of gold, which is much higher than the gold held by most investors. If you want to achieve this balanced combination, many investors need to continue to buy gold.