Recently, financial markets can basically be described as "chaos". Epidemic, war, inflation, interest rate hike, debt interest upside down. These words appear in the news almost every day. This situation has really left many people at a loss as to what to do, "cash exchange", the poor performance of the stock market, and the phenomenon of debt interest upside down in the bond market. Many people ask, what should be done?
In fact, very often, when I do not know what to do, the market has already answered everyone. Gold continued to rally last week under the pressure of a stronger dollar, rising more than 1% throughout the week, recovering most of the previous week's losses. COMEX June gold futures closed 0.4% higher at $1945.60 an ounce, the second consecutive high since March 31. A number of U. S. gold stocks, such as Barrick Gold (GOLD.US), Newmont Mining (NEM.US) are very beautiful, showing a clear long arrangement.
In Hong Kong stocks here, gold stocks are equally strong, with a number of gold stocks rising more than 4%, the most conspicuous of which is Shandong Gold (01787), which is not only the most aggressive in the trend, but also broke through the resistance of 16.50 yuan last Friday, up nearly 7.5%.
The reason is that the focus of the market has shifted to gold. According to the latest data released by the World Gold Council (WGC), global gold ETF (exchange-traded funds) recorded a net inflow of 187.3 tonnes ($11.8 billion) in March, the largest since February 2016, with an increase of 5.3 per cent in AUM under management.
Despite the recent significant rebound in the stock market and the strengthening of the dollar worries such as rising inflation and the war between Russia and Ukraine have kept money flowing into gold. It seems uncommon sense for gold to rise in the interest rate hike cycle, but in fact, in such a chaotic new normal, it is the most common sense for gold to rise.
After all, gold has always been known as a safe haven, a haven when investment markets are in turmoil. As a refuge, gold has played a full role in preserving its value. To some extent, gold can be said to be the most valuable thing in history. Many so-called new safe-haven assets, such as cryptocurrencies, are questioned on the issue of preservation of value. If you take a little look at the connection between Bitcoin and the stock market, you will find that Bitcoin is highly related to the big market, just like when the war between Russia and Ukraine began earlier, Bitcoin fell sharply with the stock market. Moreover, can such a highly passive asset really become a safe haven? Therefore, it is reasonable for the market to re-examine the value of gold as a safe haven. Gold is the real safe haven in times of crisis.
If we study the performance of gold prices in the six months before and after each interest rate hike cycle in 1999, 2004 and 2015, we can find that gold prices fell by 5% and 10% in the six months before each interest rate hike. But six months after each rate hike, the price of gold rose by 10 per cent and 20 per cent. Therefore, it is not common sense for gold to rise in the interest rate hike cycle, and it is wrong to some extent.
The interest rate is proportional to gold.
On the other hand, US sanctions against Russia's invasion of Ukraine can be said to have opened a Pandora's box called de-dollarization. The United States has used the dominant position of the dollar to impose financial sanctions for years, and if Russia can regain its strength under the sanctions, it will refresh countries' awareness of the importance of the dollar. Gita Gopinat, deputy director of the International Monetary Fund, also told the media earlier that Western sanctions against Russia could lead to a more decentralized global system, thereby damaging the dollar. Greater use of other currencies in world trade will lead central banks to diversify their foreign exchange reserves at the expense of the dollar.
Therefore, if the de-dollarization of countries really accelerates, I am afraid that gold will once again become an important role. In fact, Russia has responded by returning to the gold standard in its fight against sanctions, trading gold at a fixed price of 5000 rubles a gram. When Russia's central bank links the rouble to gold, gold can be traded in dollars, allowing the rouble to be denominated in dollars, making it harder for the West to weaken the rouble. This sanction can be avoided, and gold has such a risk aversion ability.
And as an ordinary star citizen, when you don't know what's going on tomorrow, it's also a good choice to save some gold. I believe it will be interesting to buy stocks like Shandong gold for medium -, short-term or long-term deployment. In addition to gold, you might as well pay attention to silver which has the same anti-inflationary effect.
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