As we all know, during times of war and political turmoil, economic development will be greatly restricted, and any local currency may depreciate due to inflation.
And gold has the function of hedging, has recognized characteristics, and is an internationally recognized trading medium. At this special moment, people will rush to buy gold, which will cause the price of gold to rise. However, from recent wars to gold From the perspective of price impact, the price of gold will not necessarily rise during the war.
In the past period of war, it had a greater impact on the price of gold
In the past, during times of war, the economy was unstable, and the instability of the government in power would also cause a serious depreciation of the currency issued by the government in power. It can be used as currency and circulated all over the world, so a large number of people will hoard a large amount of gold and try to convert their currency into gold, which is why the price of gold soars during wars.
At the same time, as a safe-haven asset, gold can not only avoid the danger brought by war, but also has important investment and value preservation functions as a former currency.
There is also a common saying in the folks that "when the cannon is fired, there will be ten thousand taels of gold". Gold, a traditional safe-haven asset, always seems to be on the radar of investors in times of tension.
Wars in recent years have little impact on gold prices
Compared with the wars in the past, people seem to pay less attention to gold during the wars in recent years, as shown in the table below.
Observing the rise and fall of gold prices in the early and late stages of the Gulf War and the Libyan War, the price of gold in the Gulf War rose and fell by less than 9%, while the price of gold in the Libyan War rose and fell by less than 6%. It can be seen that, In the early and late stages of the Libyan war, the impact on gold prices was relatively small. Why is the impact of wars on gold prices in recent years not as high as in previous years?
Through the data in the above table, we can see more clearly the probability of gold price rising and falling about one month before the start of the war and on the day when the war broke out.
If analyzed in detail, the rise in gold prices occurred on the eve of the Gulf War, the Afghan War, and the Libyan War, and the gold price rose significantly on the eve of the Afghan War and the Libyan War (US$5 to US$10, about 3% to 10%). The rise and fall of gold prices in the later stages of the Libyan War and the Afghan War were different from those of the Gulf War. The price of gold did not rise as expected, but fell instead.
Wars in recent years have had an impact on gold prices.
There are relatively more hedging methods in the market because of the rise of other investment varieties, the increase of hedging methods in the market, and investors also tend to other investment varieties.
With the relative stability of the major international currencies, such as the US dollar and the euro, the international environment tends to be more stable than when the financial crisis occurred, and the financial market is free to exchange.
Because the world's major currencies are relatively stable at present, no matter it is the US dollar, the euro or the British pound. Even if it is depreciated for fear of war, investors have no reason to exchange a large amount of funds into gold (some of them are possible), but should directly exchange them into currencies that can be directly invested abroad.
Although war is one of the factors that affect the price of gold, it is necessary to judge the medium and long-term trend of the price of gold by looking at the essence through the phenomenon. In the short term, the unstable factor of war may affect the fluctuation of the price of gold, but this effect is Can't stand the big situation.
Moreover, if the war lasts for a long time, as the war progresses, investors will gradually see the impact of the war situation on the gold price, and thus, the impact of war factors on the gold price will gradually weaken.
The market prefers to speculate on expectations. With the end of market hype expectations, once the expectations are fulfilled, the gold price has already included the risk-avoiding factors brought about by the war, so the profit-making liquidation of the bulls will bring the gold price back to the fundamentals.
Generally speaking, in the wars in recent years, the status of gold as collateral has become lower and lower.
Why did gold not rise but fall after the war?
After studying the performance of gold during several wars, it can be found that the war does not have a sustained push-up effect on the price of gold. Generally speaking, before the war starts and on the day when the war is declared, gold performs better on the whole; , since gold has already factored in the impact of the war, the price of gold usually starts to go downhill, as shown in the table below.
Through the data in the above table, we can see more clearly the probability of gold price rising and falling about one month before the start of the war and on the day when the war broke out.
If analyzed in detail, the rise in gold prices occurred on the eve of the Gulf War, the Afghan War, and the Libyan War, and the gold price rose significantly on the eve of the Afghan War and the Libyan War (US$5 to US$10, about 3% to 10%). The rise and fall of gold prices in the later stages of the Libyan War and the Afghan War were different from those of the Gulf War. The price of gold did not rise as expected, but fell instead.
Before the war, various reasons (including risk aversion) pushed up the price of gold, and as the war progressed, the risk aversion caused by the war eased, so there will be a temporary decline in the price of gold. And the trend after that should still be determined by the general environment and the situation.
This further proves that the wars in recent years have had little impact on the price of gold, and that the price of gold did not rise after the war, but fell instead.
Risk reminder: remember to take profit and stop loss when trading, and put risk management first.
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Last updated: 09/07/2023 02:26
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