has always been a favorite of investors. Especially in the context of global economic turmoil, currency depreciation, and rising inflation, ** has become the first choice for safe-haven assets. Recently, there has been an amazing wave of craze in the market. According to the World ** Association (WGC), in the third quarter of 2023, the global ** demand reached 10069 tons, up 12% year-on-year;The global volume fell by 4% to only 10662 tons. This means that the global ** market is in short supply.
Even more surprisingly, in the last week of the third quarter of 2023 (September 25 to October 1), the global** market saw an unprecedented inflow. During the week, a total of $64.5 billion flowed into exchange-traded (ETF) and similar products around the world. This was the largest weekly inflow ever recorded, far surpassing the $39.7 billion recorded in the second quarter of 2020 and the $19.2 billion recorded in the fourth quarter of 2019. What is the result of these inflows?It was on October 1 that ** soared by 56%, reaching 2034 per ounce$5, an all-time high!
So, what is the reason for such a ** carnival?Why are investors so bullish?Next, we will analyze this phenomenon from three aspects: the global economic situation, monetary policy, and market psychology.
a].The global economic situation
In 2023, the global economy has been affected by multiple factors such as the new crown epidemic, climate change, geopolitics and ** frictions, and there has been a significant slowdown and downward trend. According to the International Monetary Fund, the global economy will grow by just 3 in 20235%, down from 59% and 6% in 2021. Among them, the growth rate of advanced economies was 24 percent, compared with 4 percent growth in emerging market and developing economies7%。
In such a downturn and unstable economic environment, investors are exposed to tremendous risks and pressures. They need to find an asset that can preserve and increase its value, protect against risk, and provide liquidity. And ** is the ideal choice to meet these conditions.
* Scarcity, not subject to human manipulation. This makes it stable and risk-resistant, and does not fluctuate violently with the ups and downs of the market. **Can be freely traded and exchanged anywhere in the world, with a high degree of liquidity and convenience. There will be no loss due to the collapse of the bond market, the real estate market or other financial markets, nor will it be affected by the bankruptcy or default of a bank or other intermediary. It can maintain its purchasing power, even in times of high inflation.
Because of this, ** is a safe-haven asset that can play a role in an economic crisis. In the face of uncertain global economic conditions, investor demand for ** will naturally increase.
[2] Monetary policy
In 2023, the world's major central banks have adopted accommodative monetary policies in response to the economic slowdown and inflationary pressures. As of October 1, 90 countries and regions around the world have lowered interest rates, including major economies such as the United States, the eurozone, Japan, China, the United Kingdom, Canada, and Australia, according to **. In addition, global central banks have massively increased the size of money** and credit through measures such as quantitative easing (QE). It is estimated that global central banks bought about $12 trillion in bonds and other assets in 2023.
While these accommodative monetary policies have helped to stimulate economic activity and boost confidence, they have also brought some ***, the most obvious of which are currency depreciation and rising inflation. According to the International Monetary Fund (IMF), the Global Consumer Index (CPI) averaged 48%, up from 32% and 2 in 20218%。Among them, the US CPI ** is 62%, Eurozone CPI** up 41%, Japan's CPI ** up 15%, China CPI ** 38%。
In such an environment of currency depreciation and rising inflation, investors need to look for an asset that can protect their wealth from erosion and increase their yields. And ** meets these conditions.
*Not affected by currency devaluation, inflation or money printing in any country or region. It can be used as a store of value against losses caused by currency crises or recessions. It has a significant negative correlation with interest rates. When interest rates fall, the opportunity cost decreases and the value of investments increases, according to data from 2023, which has been 18 years since 20237%, well above the average yield in the global**, bond and real estate markets.
Therefore, ** is an investment asset that can benefit from monetary policy easing. In the context of falling global interest rates and currency depreciation, investor demand for ** will naturally increase.
Three].Market psychology
In 2023, the global market is full of panic and unease. In addition to the economic and monetary aspects, there are many other factors that have raised concerns and nervousness among investors. For example:
The new crown epidemic is still not effectively controlled, and countries have to adopt measures such as lockdowns, quarantines, and travel restrictions, which have brought great distress and impact to people's lives and work.
Climate change has led to extreme weather phenomena such as floods, droughts, hurricanes, fires, etc., around the world. These disasters not only cause loss of life and property, but also threaten food security and energy.
Geopolitical conflicts and frictions have exacerbated global tensions and conflicts. The deterioration in relations between the United States and countries such as China and Russia has led to a series of sanctions, retaliation, and military exercises. The impasse in the Brexit negotiations between the EU and the UK has sparked turmoil within Europe.
In such a market environment full of crisis and uncertainty, investors need to look for an asset that can provide a sense of security and confidence. And the advantages of ** are evident at this time.
* Functions as a store of value and a medium of exchange have existed for thousands of years. It occupies an important place in human civilization and is seen as a symbol of power, wealth, and dignity. It can be used as an international reserve currency and is held and used by many countries and institutions. According to the World ** Association (WGC), as of the end of the third quarter of 2023, the total global official ** reserves were 35,3476 tons, accounting for 17 of the world's ** total5%。
* It can also be used as a carrier of beliefs, cultures and traditions, used by people for gifts, decorations and collections, and given various meanings and symbols by people.
Therefore, ** is a psychological asset that can provide support in the deterioration of market psychology. Amid global panic and unease, investor demand for ** will naturally increase.
4] Rongyi's view: **The best choice for global investors
In one week, ** attracted 645 billion US dollars, because the global economic situation, monetary policy and market psychology combined with three factors, resulting in investors' strong demand and preference for **.
Investors are optimistic about the market because it has multiple advantages such as stability, generic, independent, inflation-resistant, non-monetary, high-yield, long history, universal recognition and emotional sustenance, making it a comprehensive asset that can function in any economic and market environment.
*The future movement of the market will depend on changes and developments in the global economy, currencies and markets. If the global economy continues to be sluggish and unstable, currencies continue to depreciate and over-issue, and the market continues to panic and be uneasy, then it is possible that the global economy will continue to be depressed and even break through record highs. If the global economy recovers and improves, the currency stabilizes and tightens, and the market appears calm and confident, then there is a possibility of a pullback and adjustment, or even a return to normal levels.
Therefore, I believe that ** is an asset that deserves the attention and holding of investors. However, investors should also allocate their asset portfolios reasonably according to their own risk appetite and return goals, and do not blindly chase rallies or panic sell. Only in this way can we truly enjoy the value and fun that ** brings.