The recent slump was not triggered by chance, but the inevitable result of the combined action of several factors.
First, the overall international environment has changed.
As we know, since the crisis caused by the collapse of Lehman, the economic development of the world’s major economies has been impacted by the economic crisis. In order to save their own economies, the major economies have successively offered a huge amount of loose monetary policies.
The money glut saved the global economy from collapse, but it also led to a surge in the prices of financial assets.
Now, as the world’s major economies economic dip recovered gradually, especially the U.S. economy continues to recover, in the foreseeable future, within the scope of the world’s major economies will gradually withdraw unconventional easing monetary policy, it is the expectations of rising, changed since 08 overall macroeconomic background, also pulled open the prelude to shock slump.
Meanwhile, data over the past year show that international capital continues to flow out of the international market and turn to other markets with higher returns. Among them, Soros bought ETF contracts in the third quarter of last year and quickly sold them in the fourth quarter of the same year.
The net outflow of international capital not only emptied the international gold and silver price support, but also aggravated the extent of international decline.
If the potential exit of easing measures is the root cause of the fall in gold and silver, then net international capital inflows are directly responsible for the “ax ax” of gold and silver price decline.
Finally, the regression of commodity attributes and intrinsic value.
In our long-held beliefs, the gold has been a hedge risk, one of the safe haven against inflation, but nearly 2, 3 years as the global economic crisis pressure reduce gradually, the economy of the world’s major economies have relatively good recovery, although often have the eurozone crisis trigger a financial market volatility, but the original gold as a safe haven,
Instead of showing its safe-haven appeal, it fell in tandem with risky assets.
This situation, although can not prove that gold has completely lost the function of safe haven, but in the current situation, gold is more inclined to high-risk commodity attributes.
All in all, recently, there have been a number of reasons: On Monday, the release of disappointing economic data from China, which fell short of market expectations of 8% growth, weighed on sentiment.
Some analysts believe that the steady recovery of the US economy, the strengthening of the US dollar and the weakening of the expectations of the Federal Reserve’s quantitative easing have weakened the safe-haven properties of gold, and pushed gold into a bear market after 12 consecutive years of bull market.
Market factors: The gold price continued to be weak this year, leading to a sharp decline in precious metal investors’ interest in gold investment, many gold investors turned to stocks.
Analysts in the U.S. and Europe took to social media to mock Bernanke and his central bank as playing a big game.
The former assistant secretary of the U.S. Treasury put it bluntly: “This conspiracy has been going on since April.
Exchanges are telling individual clients that hedge funds and institutional investors are putting out selling messages and warning individual clients to withdraw early as well.
Then, a few days ago, Goldman Sachs announced a further sell-off in the gold market.
What they want to do is scare individual investors away from gold.
Clearly something desperate is going on.
“There are clearly more doubts in the gold market than there were a week ago – doubts about central bank independence, central bank control of gold reserves and the sanctity of EU treaties,” said precious metals analyst Credit Suisse.
Gold bugs are realising once again that gold is not a very effective safe haven.”
The New York Mercantile Exchange has raised gold and its minimum margin requirement, raising trading costs and potentially forcing investors to close out their positions for lack of funds, which would increase the volume of gold short sales.
Hedge fund Titan Henry Paulson has lost almost $1 billion of his personal fortune in the past two days.
Gold’s performance over the past two days suggests Paulson could be forced into a concerted push by short sellers if he doesn’t close out his positions, and if he does, that could exacerbate the price’s decline.
The volatility of Japanese government bonds has risen sharply, rivaling Greek bonds, after Haruhiko Kuroda, Japan’s new governor, unveiled stronger-than-expected easing measures.
To meet the surge in margin calls, Japanese financial institutions have sold other assets to bolster capital and liquidity rather than bonds.
Since QE2, the inverse correlation between gold price movements and the implied volatility of Japanese government bonds has been very high.
You know gold though now is no longer a currency, but gold and dollar still is today the most important reserve asset, the United States, Germany, France, Italy and other developed countries of gold reserves is over 60%, the developing countries such as China, South Korea’s central bank in recent years, in various complicated situation, also began to a large number of buying gold.
Since both are important foreign-exchange reserves, if the dollar’s price rises, people are likely to dump gold, an asset that pays high storage fees but receives no interest and so on, in favour of dollars, which will fall.
Historically, after the 1980s, the establishment of the Wall Street – dollar system re-established the hegemony of the US dollar in the world.
The US economy has also entered a long-term low inflation, high growth of benign development.
The price of the dollar rose, central banks sold gold, and the price of gold fell for two decades.
If the American world, which underpins the credibility of the dollar, is disappointed, people will rush to buy gold, the only monetary metal that is independent of the credibility of any country, and the price of gold will rise.
In early August 2011, due to the increase of the debt ceiling, the United States suffered a historic downgrade of its sovereign credit rating, which had an impact on the US dollar, which broke through US $1700 / oz. On August 18, it easily rose to the high of US $1800 / oz. A few days later, it rose to a record high of US $1900 / oz.
The deepening of the U.S. sovereign debt crisis sent gold prices soaring!
Since the Bretton Woods system established the relationship between the dollar and gold, the relationship between gold and the dollar can be said to be throughout.
To discuss the relationship between the US dollar and the Euro, it is necessary to know about the US dollar index. The US dollar index is an index that comprehensively reflects the exchange rate of the US dollar in the international foreign exchange market and is used to measure the change degree of the exchange rate of the US dollar against a basket of currencies.
It measures the strength of the dollar by calculating its rate of change against a composite of selected currencies.
The currencies selected for the dollar index are Euro 57.6%, Japanese yen 13.6%, British pound 11.9%, Canadian dollar 9.1%, Swedish krona 4.2% and Swiss franc 3.6%.
When the dollar index rises, it rises against other currencies. In other words, the dollar appreciates.
As you can see from this composition ratio, 57.6% of the euro’s contribution to the dollar index will definitely ensure that as long as the euro falls, the dollar index will rise.
When the euro rises, the dollar index falls.
And so it is: as the Greek bailout was finalised and implemented earlier this year, the euro rallied, the dollar index fell and gold rose from $1,523 an ounce to $1,792.
Even though the U.S. housing market has not shown any substantial improvement since early March and the job market remains weak, the Goldman Sachs report also suggests that the U.S. economic recovery is slowing and the Fed is still expected to pursue QE3.
But as Europe’s debt crisis escalated, Spanish, French and German bond sales faltered, clouds gathered over the euro zone, and the dollar index wobbled upward, which often puts pressure on gold, which swung lower.
Thus, the rise and fall of the dollar index only shows the relative change of the situation in the US and the eurozone.
The recent rise in the dollar index doesn’t say much about the U.S. economy per se. It’s not fundamentally better, it’s just relatively better against the backdrop of the deteriorating situation in the euro zone.
When the euro falls, the dollar index rises;
As the dollar index rises, gold, both dollar-priced and a substitute for the greenback, falls.
Once you understand this logic, it’s not hard to understand why gold has fallen recently.
Germany and France had stuck to deficit-cutting plans, but the results were not satisfactory, and much of Europe fell into recession, including Germany itself.
The downfall of many of the parties that promised to cut the deficit has also made politics unmanageable.
The euro tumbled and Italian and Spanish bonds sold off after the French and Greek election results.
Greece has been thrust back into the global spotlight, with new elections set to be held after the Syriza party failed to form a government because of its staunch opposition to cuts.
Fears that the country might not be able to keep the fiscal cuts it promised as part of the bailout have raised the specter of its exit from the euro zone across Europe.
The euro/USD (1.2795,0.0019,0.15%) accelerated its decline in recent days to a four-month low on continued bad news from Greece, pushing the dollar index closer to 81.78, its highest since Sept. 15, 2010.
Pressure on gold accelerated to its lowest close since September 2011 at $1,540 an ounce.
The above is about the “reason for the decline in 2013” related introduction