Many of you who know me know that I started my career in cyclical stocks. I have experience in the futures industry, so I naturally have my own understanding and experience of commodity price changes. To put it simply, the price of chemicals is affected by crude oil, and the price of metals and non-ferrous metals is affected by gold. Gold, as the pricing anchor of metal non-ferrous metals, understands gold, in fact, understands metal non-ferrous metals.
1. Pricing model
Marx once said: "Money is not gold, gold is money". In today's world, a commodity is priced either by gold or by US dollars. Therefore, the world of gold and the world of US dollars are equivalent in terms of value.
"Fed asset size" can be understood as a miniature version of the dollar-priced world. I then multiply the "Gold Price (in USD)" by the "World Gold Reserves" to calculate the "Total Value of the World's Gold Reserves". Divide the "total value of the world's gold reserves" by the "size of the Fed's assets" to get a "gold reserves/Fed assets ratio".
Second, the analysis of ideas
Since 2000, gold has experienced 24 years of overvaluation for 12 years and then undervaluation for 12 years relative to the US dollar.
If the Fed does not continue to tighten monetary policy, gold prices are expected to rise another 30% or so to return to around the historical median, and if the Fed continues to shrink its balance sheet, then gold prices could rise another 10% to 20% to reach a phased peak.
3. Summary
To be honest, if you understand gold, you understand the dollar, that is, you understand the economic cycle and the dollar tide, theoretically, the Fed has indeed been carrying no interest rate cuts, but in the case of the US fiscal deficit, it is really difficult to say whether it can keep shrinking its balance sheet.
Again, don't chase high commodities, the cost of chasing high commodities is not less than the risk of chasing high growth stocks, commodity price fluctuations of 10% to 20%, in fact, it is already very exaggerated, many people hold the idea of doubling to speculate on commodity stocks, it is still very dangerous.
Considering that there may be some investment opportunities in commodities in the future, I am ready to start tracking and studying the Fed's monetary policy and the trend of commodities such as gold and oil as I do every day, so as to ensure that investment is not left behind!