SafariSpin| Capital markets cleared up "safe haven" when cold, gold hit its biggest one-day decline in nearly two years

Financial Associated Press, April 23 (editor Shi Zhengcheng) overnight trading time between Europe and the United StatesSafariSpinThe futures and spot prices of international gold continued to fall. Even with the biggest one-day decline in nearly two yearsSafariSpinSuch assets remain one of the best performing investments in 2024.

As of press time, spot gold in London fell 2%SafariSpin.6 per cent to $2329 an ounce, while COMEX gold futures fell nearly 3 per cent to $2343 an ounce. This is the biggest one-day decline since at least June 2022, according to data agencies.

That said, after Monday's adjustment, international gold prices are still up more than 12% year-to-date, more than double the S & P 500's year-on-year gain of just over 5%.

Why did the gold stop?

Unlike commodities such as copper and oil, the core investment value of gold focuses on "risk aversion". Unlike stocks and bonds, gold does not generate interest, and its ups and downs are basically not directly related to industrial production, so there is also a folk saying that "buy gold in troubled times".

Since the "gold pit" of global assets hit by the COVID-19 epidemic in early 2020, the spot gold price has risen by 67 per cent from $1450 an ounce at that time to an all-time high of $2431 in April this year; even since the end of October last year, it has risen by more than 30 per cent.

Of course, as a safe haven and interest-free asset, the soaring price of gold is roughly driven by two core factors: geo-risk events and the Fed's "flooding". Driven by a wave of "zero interest rate" policies in 2020, the international gold price quickly rose to around $2000 an ounce, followed by a three-and-a-half-year range shock before finding a surge in the Middle East in February and surging to $2400.

So this logic can also explain Monday's significant correction.

In terms of geo-risk, the frontal dispute between Israel and Iran turned towards convergence over the weekend, superimposed profit selling pressure, and Fed officials who have been cracking down on expectations of interest rate cuts over the past few weeks have entered a "period of silence". It is also reasonable for gold to fall more or less sharply.

As a cross-reference, the S & P 500 index rose more than 1% on Monday, the first time the index has risen since April 11; the broader silver period and spot Monday fell nearly 5%, and international oil prices are also falling in the direction of ups and downs, confirming the moderation of the Middle East problem.

In addition to the occasional geopolitical events, gold also has a long-term pricing support: not global "aunts", but national "central mothers". Central banks have continued to increase their gold holdings over the past few years, with central banks' gold reserves increasing by 2100 tons in 2022 and 2023 alone. By contrast, central banks around the world have increased their gold holdings by 7800 tonnes over the past 14 years.

The adjustment was earlier than expected.

As for today's gold trend, senior gold analyst Mark Mead Baillie commented on Monday that the most perfect expression is still that gold is very overbought in the short term, but is still grossly undervalued in the long run.

According to the BEGOS market indicator created by Mark (bonds / euro / gold / crude oil / S & P 500), gold has seen a large premium to its value over the past three months. Mark says there are nearly 8.SafariSpinA premium of .8%. The last time there was a premium of this level was at the beginning of the conflict between Russia and Ukraine in March 2022, after which gold continued to fall to the end of the year.

Mark said that given that the recent elasticity of gold prices comes from the new Middle East conflict, it has been proved over the years that the geopolitical surge in gold prices will be short-lived. He is wary of prices reaching their recent peak.

He also reiterated the long-term fundamental value of gold. Mr Mark said something "must be paid" given that IMF recently mentioned again that "US debt levels are unsustainable" and have a global impact. So these recent negative perceptions of gold (in the long run) may not make sense.

Mark's statement coincides with Citigroup analysts. In a report earlier this month, Citi analysts raised their target price for gold over the next six to 18 months to $3000. Analysts also say that as global debt levels soar to $315 trillion, retail investors, family offices and the very wealthy are enthusiastic about buying gold.