A Series Of Market Reactions Pmitted By Large Fluctuations In Gold Prices.

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< p > there is no topic that makes investment discussions more polarized than gold.

Because of this, the recent sharp decline in gold prices has pushed the debate between two camps that believe in their respective views to be white hot: one camp believes that gold is overvalued and lacks the benefits of income and capital appreciation; the other camp believes that other people once again realize that Huang Jin's unique function is only a matter of time, because gold can be used to hedge almost any economic plight that may impact diversified investment portfolios.

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P, though this debate is interesting, it fails to highlight the potential importance of the current situation.

Recent fluctuations in gold prices reflect a trend that has also emerged in other areas.

More importantly, it supports a gradual expansion of the western market system, which has been based on actual pricing practices for a very long time.

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< p > we are not familiar with the story of gold, which is commonly told.

In an increasingly turbulent ecosystem, in a world where more and more central banks are making great efforts to blow up their own balance sheets, investors are rushing to buy gold as a tool for hedging the risk of uncertainty (inflation) and coping with great uncertainty, including the destruction of the economic system that was previously unimaginable.

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< p > gold prices are rising, and their valuation is seriously out of touch with the actual supply and demand fundamentals. Until a piece of unimportant news shook the foundation of the operation mode, this trend came to an end.

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< p > although inflation expectations are low and stock prices have risen to a certain level, the real catalyst for the collapse of gold prices is a rumour that Cyprus may be forced to sell gold reserves under pressure from European partners.

The amount of gold involved in this case was negligible (less than $1 billion at that time), but investors suddenly began to pay attention to the possibility of selling large quantities of gold and making the market vulnerable to other European economies, especially Italy, which has a gold reserve of about $130 billion.

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Less complicated than P, which is enough to reduce gold prices by 15% in less than a week.

Since then, gold has been struggling to regain its footing (as of this issue, the gold price is $1385 an ounce).

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< p > if we turn our attention to the field of enterprises, we can regard the above basic trends as a dynamic trend of a large brand whose valuation is completely out of touch with the intrinsic attributes of the product.

Because of this disconnection, the brand is vulnerable to changes in public opinion (or economists describe the steady imbalance).

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< p > over the past year, apple Apple and Facebook share prices have seen similar developments.

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Apple's share price rose steadily to a level of slightly more than $700 a share. It suddenly fell into a stall and plunged below $400 per share. The stock price was about $440 a share at the time of the deadline.

Why is this? The fundamental reason is that although apple is a strong brand, the brand's "magic power", which is used by a former Apple employee and writer Gaye Kawasaki (Guy Kawasaki), has finally led to the fact that Apple's competitors are trying to catch up when they are valuing it.

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< p > look at the case of Facebook again.

Facebook's initial public offering (IPO) was oversubscribed by investors and the issue price was set at $38 per share, mainly due to its household name and related speculation.

After a brief rise, Facebook's share price dropped to below $20 per share, because a large number of professionals voted against the company's valuation with a large and apparent disconnection.

As of press release, Facebook's share price was about $26 per share.

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P, of course, these are only well-known cases, and it can be concluded that these cases show the fact that the financial market will neither increase nor fall too much.

But now I think that when the central banks act to promote growth and employment has inserted a huge wedge between the financial market and the economic fundamentals, we can draw another conclusion from the gold issue.

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The central bank's repeated commitment to asset purchase plans has not only prompted more and more investors to increase their exposure to investment portfolios at higher and higher prices, but also suppressed market volatility, diluted relevance and created illusion of stability - a complex ecosystem characterized by rare sovereign dynamics, changing regulation, huge tail risks, a general craving for new growth and employment patterns, and an intensification of innovation rather than a suppression of inequality between the rich and the poor. P

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In essence, the global economy itself is also in a stable and unbalanced state. As the expectation that the Central Bank of the western countries and the more powerful political system will bring about higher economic growth, the pace of the market is already bigger than the fundamentals. P

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< p > if this expectation is not realized, investors must worry about more than the intrinsic value of gold.

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