Gold(GLD) and crude oil(USO) plunge and lose their value?

Recently, the stock market has experienced ups and downs. During the financial crisis, gold, bonds, and even bitcoin, which have been regarded as value-preserving, have depreciated. Can't help but make many investors confused, why is it like this?

gold

Gold On February 24, due to the stock market crash, a large number of institutions sold gold to make up for the losses of these institutions in the stock market and to increase margin. The price of gold resumed its rise in early March and then fell to a lower level again on March 9. Many investors were confused. Should n’t gold be a hedge? Should n’t gold and the stock market rise in the opposite direction? All of this has nothing to do with the shortage of funds in the repo market.

The Fed ’s bailout ceiling is far from enough, and then the Fed issued an emergency statement on March 12. "Starting on March 12, 500 billion bailouts will be provided. Tomorrow the Fed will provide another 500 billion three-month repurchase loans and 500 billion one-month repurchase loans. In the remaining three months, each week will provide a total of 1 trillion bailout funds. "I do n’t know if you are stunned by this pile of numbers. In other words, the Fed will provide a total of $ 1.125 trillion in bailout funds every week. Some friends may say that the repurchase of market loans needs to be repaid and cannot be accumulated like this, but let us consider that this week ’s 1.125 trillion loans, most of the long-term repurchase loans have a term of 1 month and 3 months. In other words, at least until April 13, the Fed will not receive any refunds.

Before all the bailouts, is this just bare money, and then the huge bailouts in the repurchase market have anything to do with the depreciation of gold we see? Not just gold, but many other financial products that should be kept. Like Bitcoin, it fell from the US $ 12,000 to the US $ 7,000. Low-risk corporate bonds, plus 10 years of the national debt, interest rates both soared. All of this is because, even though the Fed provides a lot of liquidity to solve the shortage of funds, the problem is that all these institutions go to buy back market loans and need to provide collateral. The problem in the market now is that although the Fed provides liquidity, everyone has no collateral! Therefore, when many institutions need a lot of liquidity, many institutions have the problem of lacking original repo collateral. If there is no collateral, even if the repo market is rich, they will not borrow it! This has led various institutions to start selling their gold, 10-year Treasury bonds, corporate bonds, and even bitcoin. After cash, they will use cash to buy Treasury bills.

crude oil

After analyzing the reasons for the depreciation of gold and other value-preserving financial assets, let's take a look at the latest situation of crude oil. The price of crude oil plunged by 24% on March 8, 2020, making it the worst day since 1991. This incident came from cruise ships around the world, and airlines began to stop operating. Therefore, global crude oil consumption has been greatly reduced. If demand is low and supply remains unchanged, then crude oil prices will be greatly reduced. Therefore, OPEC, headed by Saudi Arabia, negotiated with Russia, another major oil producer.

What Saudi Arabia means is that demand is very low now. Let us reduce production together. This prevents prices from falling. The problem is that oil and natural gas account for 30% of Russia ’s GDP. Of course, Russia is not willing to reduce production. This not only lowered the price of crude oil, but also issued a statement saying that it would substantially increase crude oil production, and crude oil fell directly to $ 33 per barrel. As a result, Trump saw an opportunity. Many countries have internal oil reserves. To prevent certain major disasters from disrupting the supply of crude oil, the U.S. oil reserves may reach 727 million barrels. The U.S. oil reserves are sufficient. On March 13, 2020, Trang Pu also ordered that the current crude oil prices are really good and the United States will replenish its oil reserves. In other words, 90 million barrels of crude oil will be purchased. With this order, the price of crude oil rebounded by 5%. Trump bought a lot of crude oil at a low price. In addition to stabilizing crude oil prices, it is estimated that political factors will not decrease. Then Saudi Arabia and Russia will We will wait and see what kind of turbulence it will bring to the crude oil market.

Comments

Investors have begun to switch back to traditional growth stocks

On Thursday, the stock prices of Cisco, Alphabet, and IBM hit new highs. But more importantly, the previously unpopular speculative growth stocks, including stocks bought by many ARK funds, have now begun to rebound. How is this going? Investors' perspective on the market is changing. In the first quarter of this year, mainstream voices in the market believe that the economy will restart strongly, bond yields will rise, and inflation may become a problem later this year. After the end of the first quarter, these expectations were only partially fulfilled. The U.S. economy has indeed restarted strongly, but bond yields fell in the first quarter instead of rising because investors began to believe: 1) Inflation and supply chain disruption may indeed be "temporary", as the Fed insists; 2) The second and third quarters will be the highest points of stock returns and economic growth. Alec Young, a chief investment officer of Tactical Alpha, said: “...

Will the Great Depression make a comeback?

the Great Depression On March 21, 2020, the United States already had initial unemployment data. Exceeding market expectations, the number of applicants reached 3.28 million, a record high. The current unemployment situation in the United States. Before March 7, employment in the United States was not affected by the epidemic. In the week of March 7, the number of people applying for unemployment benefits for the first time in the United States was 211,000, a decrease of 4,000 compared to the previous week. It is still healthy. This shows that the United States is in a good employment track range. The actual data began to fluctuate, that is, the data for the week of March 14, the number of people applying for relief reached 282,000, a slight increase. On March 21, the number of people applying for unemployment benefits soared to a record high this week. 1.7 million people have far exceeded expectations, and market expectations are about 1.5 to 1.7 million people. It can be said...

Intel, Twitter, and Snapchat stock forecast 2025: latest quarterly earnings reports

Three technology companies, Intel, Twitter, and Snapchat, released their latest quarterly earnings reports. Let's take a look at their performance and the key information revealed at the earnings conference. Intel(INTC) stock forecast 2025 Several important data on Intel's earnings report beat expectations. Among them, earnings per share were US$1.28, higher than the expected US$1.06, an increase of 12% over the same period last year; total revenue was US$18.5 billion, beating analysts’ expectations of US$17.8 billion. However, in Intel's guidance for the next quarter, the Non-GAAP gross profit margin given is only 55%, which is far lower than the market's expected 59.2%. The reason given by Intel is that it is worried that supply chain problems will limit profitability, and the expected chip manufacturing business will bring additional costs. For chip companies, the market is most concerned about gross profit margin. TSMC fell last week b...

NIO and Tesla(TSLA) stock forecast 2025: released important news

In the past two days, two electric vehicle companies, NIO and Tesla have released important news. However, the market gave mixed reactions, one rose and the other fell. Let's take a look at what happened. To NIO stock forecast 2025 Let me talk about NIO first. NIO announced this morning that the company will issue additional shares totaling US$2 billion. The price of the additional issuance will be based on the current market price, and the timing of the issuance will be determined according to the company’s needs. It may be a one-time sale or a share. Wholesale sale. After calculation, this will cause about a 3% equity dilution for existing shareholders. However, the market seems to have given more interpretation. Today, NIO's share price has fallen by 6.3%, which is more than twice the theoretical dilution. To From the prospectus, the company only stated broadly that the funds raised will be used to strengthen its bala...

Coinbase stock forecast 2025: it's first quarterly report

After the trading hours on May 13 (this Thursday), Coinbase Global (COIN) will release its first quarterly report. Take this opportunity to give us a glimpse of the prospects of the first share of cryptocurrency exchanges. Actually, on April 6, before Coinbase went public, it had already released a forecast for the first quarter of this year. The core data are as follows: Revenue in the first quarter was approximately US$1.8 billion, a year-on-year increase of 842%; before the net profit was between US$730 million and US$800 million, the median was US$765 million, a year-on-year increase of nearly 23 times! Assets on the platform are 223 billion US dollars, accounting for 11.3% of the market share of encrypted assets; 56 million verified users, and 6.1 million monthly transaction users (MTU). It is worth noting that Coinbase's net profit margin reached a terrifying 42.5% in the first quarter, and the business model of “casino” is really profitable! ...

Will China's economy recover as the epidemic is under control?

During the Chinese Spring Festival, novel coronavirus broke out in Wuhan, and the Chinese stock market was hit hard. Subsequently, the Chinese government quickly took strict measures to block Wuhan, a city with a population of tens of thousands of people, to prevent the further spread of the epidemic, and to take corresponding epidemic prevention measures in other cities. When the worst of the epidemic had already occurred, the Chinese stock market quickly rebounded. As the number of infections continues to decline, China's Shanghai Composite Index is expected to rise further. Sars Period Looking back on similar events in the past, the SARS epidemic in 2003, the stock market also made a short-term decline, and then the SARS epidemic was brought under control, the stock market immediately went up for a long time. According to past historical data, the impact of the novel coronavirus epidemic on the stock market may be short-lived. China Fund Capital Flow Howeve...

Bear market coming, gold(GLD) assets become essential

The economic data of the global economic powers have been deteriorating, entering the bear market stage of the economy, and people have become more cautious when choosing asset investment. We should choose investment products with a low correlation coefficient with economic performance and investment products suitable for the current economic cycle. Investors should pay more attention to foreign exchange and commodity markets so that they can add value to your assets. Among many assets, anti-inflation commodities such as gold have become essential assets. Take gold as an example. For many years, gold has been regarded as an anti-inflation commodity by international capital markets and has been regarded as an important asset hedging tool by investors. There is also a saying, "The world bought gold during turbulent times." From basic political theory, we know that gold is not currency, and the currency is naturally gold and silver. Although gold has withdrawn from ...

4 George Soros advice to investors!

Who is George Soros? George Soros is a Hungarian-born Jewish businessman. It is one of the most influential investors in the world. In 1969, the Double Eagle Fund was established for Arnhold & S. Bleichroeder, an investment management company. In 1973, Soros and his assistant Rogers left Bleichroeder to co-found Soros Fund Management. In 1979, the well-known Quantum Fund was established and continued to make profits. In the Asian financial turmoil in 1997, George Soros sniped the Thai baht and the Hong Kong dollar, which was frightening. Learning from the experiences of successful people can benefit a lot. Here are 4 tips George Soros gave investors. First, to be successful, you must have ample free time. Most people want to be rich, but not everyone realizes the importance of free time. Many people spend a lot of time working to accumulate wealth, sleep, and forget. Set the goal to complete the work indicated by the superior, or the needs of business partners. But they hav...

4 economic indicators that must be observed!

Stocks are one of the simplest and most passive types of income, but when we invest in the stock market, we always feel that the current stock price is on the high side, but if we don’t enter the market to buy stocks, we are afraid that the stock price will continue to rise. When the U.S. stock market continues to hit new highs, should it enter the market or should it wait and see and wait for the crash to enter the market. First of all, I want to declare that I am a value investor and insist on the BUY AND HOLD operation method. We all know that stocks are cyclical, and we are now experiencing the longest bull market in history. Stock market analysts believe that a crash may come at any time, but we just have no way to predict the specific time. I believe everyone understands. But I know that a bear market will definitely come. The long-term trend of stocks often has several economic data as a reference. Today we will take a look at these economic data. source: tradingview...

Barrick Gold stock price soars after Warren Buffett's buys a stake?

Has Buffett bought gold ? Buffett has not changed. Buffett does not want to hold physical gold, but he has never said that he will not buy shares in gold mining companies. Looking at the entire market, there are not many stocks that fit Buffett's trading. And Barrick Gold Company is just one of them. Buffett bought nearly 21 million shares, and the current share value is $563 million. We now look at the underlying logic of Buffett's purchase of Barrick Gold stock. Compared with physical gold ETFs, gold mining companies can respond positively to market conditions. There are financial reports to analyze, With dividends and stock repurchase plans, gold mining companies have the right to reward shareholders through capital return plans. In contrast, the physical gold ETF has no gains. The market generally believes that it is still in the upward cycle of gold prices . The current international environment is one where black swans emerge one after another. While paying att...

FinanceLinkway

Search This Blog