Affected by the epidemic, the global capital market continued to fluctuate, and investor risk aversion continued to rise. However, gold, which has long been hailed as the safe-haven asset of choice, seems to be less "safe-haven" this year. Bitcoin, which is regarded as a safe-haven asset by some overseas investors, also suffered from "Waterloo". Are traditional safe-haven assets still safe? Where is the safe and reliable haven?
This year, during a “panic moment” in the global capital market, gold suffered a massive sell-off, and the price of gold “dived” substantially. In addition to gold, Bitcoin, known as "digital gold" by some overseas investors as a safe-haven asset, also fell below $ 4,000.
Are traditional safe-haven assets still safe? Where is the safe haven?
Is gold still safe?
After a sharp dive, gold has hit a new high recently. On April 14, the international gold price touched $ 1,785 per ounce, surpassing the highs since October 2012 and rising more than 23% in a month.
However, the scene of the deep decline of gold in March still made investors feel terrified. Starting from the meltdown of US stocks on March 9, gold continued to fall, setting the largest weekly decline since 1983. After 10 days, on March 19, gold has fallen by 12%. During this time, gold fell to a historical low of 1450.9 US dollars / ounce.
This deep dive made gold's status as one of the first choices for safe-haven assets "precarious." So, does a sharp drop in gold mean that its hedging function has failed?
In fact, it is not the first time in history that gold has fallen like this. It's not the first time gold has lost its safe-haven traits when market panic soared sharply. In 2008, due to the impact of the international financial crisis, gold was sold off and fell sharply with US stocks, which fell more than 30%. It was also considered that its risk aversion property had failed.
"But this does not mean that gold is no longer a safe-haven asset." The China Merchants Bank Research Institute believes that the main reason behind it is that when panic rises to a very high level, the collapse of equity assets and the pressure of product redemption will lead asset management institutions Systemic liquidity problems, reducing holdings of non-core assets such as gold, and ensuring the liquidity of the portfolio have become one of its crucial options.
In other words, gold was sold off in March, mainly because of the panic decline in the financial market, and the lack of liquidity in the short term by investors, that is, lack of money. At this time, the most liquid assets need to be sold as soon as possible in exchange for cash to supplement liquidity. And gold is precisely one of the most volatile varieties. Therefore, it is not surprising that the price of gold fell sharply at a time when financial markets suffered a major shock.
The rise of the US dollar during this period can also confirm this. As the market's demand for US dollar cash soared, the US dollar was pushed higher in a short period of time. Starting from March 9, the US dollar index rose rapidly; until March 18, the US dollar index broke through the integer mark of 100 again after 4 years; on March 19, the US dollar index fell after reaching a high of 102.
Some people even summarize the "love and hate" between the market and gold as: the market generally buys gold when it is pessimistic and sells it when it is desperate.
Therefore, even if there is a deep decline, it does not mean that gold is "discolored". In the medium to long term, Wen Bin, chief researcher of China Minsheng Bank, believes that as global negative interest rates intensify, the value of gold as a traditional safe-haven asset will continue to increase.
Song Xiao, a macro analyst at Haitong, believes that under the low interest rate environment, the price of gold will be in a long-term moderate upward range. An aging population and slow technological progress have led to a lack of endogenous power for economic growth. Facing the weak economy, the central banks of various countries adopted loose monetary policies, resulting in the interest rates of most developed countries staying at historically low levels, so that the support of asset preservation demand for gold will still exist. However, at present, there is limited room for further sustained and substantial downward interest rates in various countries. There is a long-term basis for gold prices, but the long-term increase is in a moderate range.
"Bitcoins" fell
Compared with gold, bitcoin, which some overseas investors call "digital gold", is much more bleak.
From March 8th, Bitcoin began to stage a "great avalanche" market, which began to fall from 9141 at 0:44 on March 8 and fell nearly 19% in 24 hours; on March 12, Bitcoin continued to plummet The largest decline in more than 50% in 24 hours, the lowest fell to 3,915 US dollars, the lowest since March 2019.
Bitcoin's price plunged by two-thirds within a week, as did other "virtual currencies" such as Ethereum. This has caused a large number of related contracts to burst, and those investors who have added leverage have suffered particularly heavy losses.
This makes many currency circle investors laugh at themselves: waiting for the "halving" market, I did not expect to wait for the halving of the market.
Bitcoin "halving" refers to the automatic halving of the amount of Bitcoin added every 4 years. From the day of its birth, Bitcoin has set a limited total amount of 21 million, with a fixed output every 10 minutes, and the new increase is automatically halved every 4 years, up to 2140. This highly imitated gold rule also led some investors to believe that bitcoin can have the same hedging properties as gold.
In May this year, Bitcoin will usher in the third "halving". Therefore, some investors believe that halving bitcoin production will trigger price increases. This can be said to have formed a "consensus" within the "currency circle" before this round of plunge. In addition, the market believes that under the background of weak global economic growth, the market is generally sluggish, and some safe-haven funds will pour into the Bitcoin market, thereby pushing up prices.
Under the "consensus" of the market, since January this year, the Bitcoin market has indeed ushered in an upward trend. On January 3, Bitcoin started at $ 6875.93 and quickly broke the $ 8,000 mark. On January 27, Bitcoin's price accelerated after surpassing 9,000 US dollars, and then after consolidating within 10,000 US dollars, it broke through the 10,000 US dollar mark on the morning of February 9 and surged 45% in two months.
But after the skyrocketing, what was waiting was a more violent plunge.
Recently, although the bitcoin crash has basically ended, on April 13th, bitcoin fell again below the $ 7,000 mark, which made many investors think that the "halving" market may be difficult to produce.
Regarding the hedging function of Bitcoin, Wang Yongli, the former deputy governor of Bank of China, pointed out that it is impossible for Bitcoin to become an important safe-haven asset like gold. The last thing that can be avoided is still gold and the national debt and currency of the most important countries. Bitcoin's "design" that completely sets the total and staged output in advance and periodically reduces the staged output by half has no room for regulation and control, and its circulation is difficult to correspond to the scale of tradable social wealth. At the same time, it lacks national sovereignty And legal protection means that the secured social wealth is difficult to use bitcoin for transactions, which will inevitably make it difficult to maintain its currency value basically stable.
Where is the safe haven
What kind of asset is a safe haven?
Mainstream safe-haven assets generally include bonds, precious metals, US dollars, Japanese yen, and Swiss francs.
China Merchants Bank Research Institute ranked the performance of safe-haven assets in the 14 market panic phases from 1990 to the present. From the perspective of the ranking of winning rate, the yen (86%)> US debt (79%)> China debt (75%)> Swiss franc (71%)> Gold (64%)> US dollar (36%).
The study found that during the market panic phase, the yen and sovereign debt have stronger hedging characteristics than gold and the dollar.
Specifically, in comparison with gold and safe-haven currencies, among the relative safe-haven strengths of gold, the US dollar, the Japanese yen, and the Swiss franc during the panic phase, the average yield of the yen in the safe-haven range is close to 3%, and the Swiss franc Secondly, gold is the worst; on the bond side, because U.S. debt is a globally priced asset, the downward rate of U.S. debt interest rates in hedging scenarios tends to be greater.
The China Merchants Bank Research Institute believes that during the panic period, from the perspective of security margins, liquidity and mortgage qualifications, the core national sovereign debt is the best asset allocation, so market funds are often swarming to purchase US debt Represents the sovereign debt of core countries.
In this round of volatility, RMB assets are also favored. Cheng Shi, chief economist of ICBC International, believes that since the beginning of the year, the cumulative decline in China's stock market has been far less than in major markets such as Europe, the United States, Japan, South Korea, and India. More importantly, for the market, investment is "buying the future", not "buying the past." The long-term economic stability in the future will become the core element of market considerations. Based on this, RMB assets are expected to become a new type of safe-haven assets—although not a “safe haven” with no fluctuations in the absolute sense, but with their relative resilience and growth, they can become the “ballast stone” of global long-term funds in the storm.
Chen Guojing