The brilliant performance and profound lessons of the gold market in the first half of the year
In the first half of 2020, due to the impact of major factors such as the new crown virus epidemic and low interest rates, gold, as a safe-haven asset, performed well in terms of increase and return on investment. There was also a major outbreak in Europe and the United States in mid-March. The Federal Reserve During the two unexpected rate cuts, many investors ignored the strong hedging properties of the U.S. dollar under high-risk events and bought gold, which resulted in a profound lesson of large floating losses.
1. Enter the top three in the global asset rise and fall rankings in the first half of 2020
Gold entered the top three in the global asset ups and downs list in the first half of 2020 with an increase of 17.38%, far surpassing the Dow Jones Index, the U.S. Dollar Index and WTI crude oil. As shown below:
Global asset ups and downs rankings in the first half of 2020 (Source: Golden Ten Data)
2. The return on reserve assets of central banks is the champion
According to statistics from the World Gold Council from January 1 to April 17, 2020, the rate of return on gold reserves in central banks’ reserve assets is higher than that of U.S. Treasury bonds, US dollar-denominated investment-grade institutional and corporate bonds, and Eurozone sovereignty Safe-haven assets such as bonds.
Source: Bloomberg, World Gold Council
3. The price of gold futures reached the highest level in the past nine years
Market data shows that on the last trading day of the first half of 2020, gold futures for delivery in August hit a maximum of $1,804 overnight, which is the first time since November 2011 to break through the 1,000-eight mark. The year-to-date increase in gold prices has expanded to 18%. Due to low interest rates and the recurrence of the new crown virus epidemic, the demand for gold as a safe-haven asset has been driven.
4. The precious metal prices performed well in the second quarter, becoming one of the best quarters
In the precious metals market in the second quarter, the monthly price of gold rose for three consecutive months; platinum set its best quarterly performance since September 2012; silver set its best quarterly performance since the end of 2010.
5. The most profound lesson: In mid-March, the US dollar’s hedging properties were far stronger than gold under high-risk events, and large floating losses occurred.
The model of the seesaw effect between gold and the U.S. dollar index always appears
From March 9 to March 19, 2020, during the outbreak of the epidemic in Europe and the United States, the Fed cut interest rates twice more than expected, the red line (gold) fell sharply, and the blue line (US index) rose sharply.
Most traders ignore the characteristic that the dollar’s hedging properties are far stronger than gold under high-risk events, leading to buying gold during the outbreak period and ignoring the trend of the dollar, resulting in large floating losses.
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