The maximum decline reached 6.36%, and gold prices continued to decline! How should investors allocate it?

Bagel Finance

2024-05-13 09:00Published on the official account of Beijing China Business Newspaper "Bagel Finance".

Recently, the international gold price has continued to decline, and the spot price of gold in London hit a new low since April 5 on May 3, with a cumulative maximum decline of 6.36% during the period.

From a domestic point of view, the "May Day" holiday was affected by the decline in international gold prices, and the terminal gold prices and sales also fell significantly.

Seeing that the price of gold has fallen, is it better to buy gold when it is rising or when it is falling?

First of all, we should pay attention to the reasons behind the sharp drop in gold prices:

1. Strong US Dollar:

Due to strong US economic data, the market expects the Federal Reserve to accelerate the pace of interest rate hikes, which pushes the dollar index higher and puts pressure on gold prices.

2. Changes in Inflation Expectations:

Gold is often seen as a safe haven against inflation. However, as the global pandemic gradually comes under control and some economies begin to recover, market concerns about long-term inflation have eased, which may also lead to a decline in gold demand.

3. Impact of Market Sentiment:

In an environment of geopolitical tensions and increased market uncertainty, gold's safe-haven properties will be amplified and prices will rise accordingly. Conversely, when market sentiment stabilizes, gold's attractiveness decreases.

Although the price of gold has retreated, the investment value of gold is still worth watching in the long run.

Wang Lixin, CEO of the World Gold Council China, said that the Global Gold Demand Trends Report for the first quarter of 2024 pointed out that domestic retail gold investment demand is likely to remain healthy. In order to support the economy, expand domestic demand and boost confidence, prudent domestic monetary policy may lead to a further decline in interest rates, and gold is expected to increase its attractiveness against the backdrop of declining local opportunity costs. Second, retail investor interest in gold is likely to continue to be elevated as the record-breaking pace of gold purchases by global central banks continues to gain traction. In addition, weakness in the property market, potential volatility in the RMB exchange rate and the potential for heightened global geopolitical tensions could also contribute to the growth of retail investment demand.

The report also notes that based on gold's recent performance, gold returns in 2024 are likely to be much higher than expected at the start of the year. If prices level off in the coming months, some price-sensitive buyers are likely to re-enter the market, while investors continue to view gold as a good safe-haven asset while awaiting interest rate cuts and election results.

Ordinary investors must grasp these three points:

1. Choose the right investment channel: understand the characteristics of various gold investment products, such as physical gold, gold jewelry, gold account, gold ETF, etc., and choose the most suitable investment method for yourself.

2. Long-term holding: Gold investment is not suitable for short-term operation, but is more suitable for long-term holding. Avoid frequent transactions to avoid increasing transaction costs.

3. Diversification: Don't put all your money into gold, but use it as part of your portfolio and pair it with other asset classes such as stocks, bonds, etc. to diversify your risk.

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