"Gold prices plummeted today!" Such a title always catches the eye instantly. However, for many netizens, this "plummet" is no longer strange. Someone joked: "Every day I say it is down, but after seeing it, it is still as high as ever." Indeed, after experiencing the soaring gold price in previous years, the current level of more than 500 yuan per gram is still sky-high for most ordinary people.
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It is not easy for investors and traders to determine whether a price point falls under the definition of "plunge". Because the words of the plunge themselves have an absolute, strong connotation, they tend to cause overreactions. In fact, this is just a normal correction in gold prices after a period of rally. After all, the unilateral rise of any market cannot be sustained, and the downward adjustment is also reasonable.
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Judging from the data, as of the early morning of May 3, the domestic gold price was 545.90 yuan/gram, and the international gold price was 2300.83 US dollars/ounce. The gold recycling price is much lower than the spot price, only 533 yuan/gram. The price difference is a big hidden danger that many investors need to face.
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Some netizens commented: "Go to a gold store to buy 1 gram of gold for 533 yuan, go to a gold store to sell 1 gram of gold for 333 yuan, this is the reason why the price of Chinese gold stores drops." "It can be seen that in physical gold transactions, problems such as few recycling channels, high handling fees, and low premiums are still widespread.
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Some netizens pointed out: "Why do many gold speculators care so much?" In the future, the international gold price and the domestic physical gold may be decoupled. "This illustrates one of the biggest risks that can be faced when investing in physical gold: the decoupling of domestic and foreign gold prices.
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Once there is a disconnect between the international gold price and the domestic physical gold price, it will undoubtedly have an impact on the domestic physical gold trading market. For example, if the international gold price rises in the future, and the domestic physical gold price fails to follow in time, it is very likely that the bulk silver in kilograms will be reversed to overseas markets, triggering a domestic supply contraction; Conversely, if the domestic physical gold price climbs but is not recognized by the international market, investors will be exposed to the risk of not achieving the expected returns.
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From this perspective, some potential chaos in the current domestic gold market, such as opaque pricing, excessively high premiums, and "no entry but no exit", may exacerbate this risk of domestic and foreign decoupling.
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However, for ordinary consumers, gold is fundamentally different from the use value of banknotes, and the attention is not high. As someone said: "What plummets, it has nothing to do with our people, we don't buy it anyway." This can also be seen from the decline in physical demand for gold in recent years.
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Historically, there have been many periods when gold was used as an important currency and payment tool, as a tool for preserving and increasing the value of wealth. However, under the current monetary policy and financial regulatory system, physical investment in gold has been relegated to a marginal position.
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If some major upheaval or change occurs in the future, gold may regain its monetary properties. In addition, gold investment is currently regarded more as a financial investment target tool, especially when inflation expectations are rising, and its role as an anti-inflation hedging tool is more prominent.
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For ordinary investors, if they are interested in investing in gold, it may be more convenient and direct to choose financial derivatives instruments such as gold ETFs and gold spot futures, rather than holding physical gold. In contrast, it has good liquidity, low fees, and avoids many of the drawbacks of physical gold trading.
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To sum up, although the sharp rise and fall is eye-catching, it is more important to pay attention to the deeper reasons that lead to large price fluctuations. In the short term, gold prices are affected by the monetary policies of global central banks, trade wars and geopolitical tensions. In the long run, expectations about the outlook for gold on the demand side are the main reason for the volatility of gold prices.
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On the other hand, for long-term gold holders, short-term price fluctuations will not have much practical impact, but may cause problems such as the possible decoupling of domestic and foreign gold prices, the widening of the spread between spot and physical gold prices, and the chaos of the physical gold circulation and trading system.
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Whether you hold physical gold or other financial derivatives, you must have a thorough understanding of the ins and outs of gold price fluctuations and the influencing factors before investing, and consider subsequent risk prevention and control and investment strategies. Jumping into the wave of skyrocketing and plummeting will only be drowned by the market. If you can see the essence beyond volatility, you can gain insight into where the investment opportunities lie. The picture comes from the Internet
(The above content is personal original content, only personal opinions)