Be careful of the gold, The Great Crash Ahead!

Next Thursday night, Beijing time, the results of the most important meeting of the Federal Reserve on interest rates will be released.

Besides how much to raise interest rates in September, it will also determine the rate increase by the end of the year, which determines the central level of interest rates. Economists had expected that when the US interest rate was still lower than 3%, the impact on the financial market might not be great, but when the Fed's benchmark interest rate was higher than 3%, the impact on the market would gradually increase, and the desire to do at least would be greatly weakened.

In September, no matter whether the interest rate increase is 75 or 100, the interest rate will reach 3%, and the real impact on the financial market has just begun. In the fourth quarter, everyone is on a roller coaster.​​

Raise interest rates by 75 basis points in September, continue to raise interest rates by 75 basis points in November, and then raise interest rates by 50 basis points in December. The annual interest rate center reaches 4%, which is the expected path of the current market. Anyway, after the mid-term elections, there will be less political pressure for the Fed to raise interest rates sharply, which may bring important respite (rebound) opportunities for the market.

The sensitivity of gold price to interest rate has increased

Gold is a real interest rate sensitive commodity, as long as there are no other factors, such as war. Then in the interest rate hike cycle, gold prices are weak.Last week, the sharp decline in gold prices broke the thoughts of many bulls.

Fundamentally, Russia is the most hurt by the fall in gold prices. After the Russian-Ukrainian conflict, everyone analyzed that if the United States wants to sanction Russia, it must start from two aspects, one is energy prices, and the other is Russia's foreign exchange reserves. Since Russia was sanctioned once in 2014, its foreign exchange reserves are not a large amount of dollars and euros, but a basket of Asian currencies and gold instead.Therefore, when the price of gold falls, the effect of sanctions against Russia will be more obvious.

Moreover, the Russian ruble is the only currency that has not depreciated or even appreciated against the US dollar in the near future, so it is conceivable how serious the decline in gold prices has reduced its overall foreign exchange reserves.​​

Technically, after the gold price broke last week, although it is still on the edge of a large range in theory, as the Chinese saying goes, "There are only three things", and the result of bottoming out again usually breaks through downward, so I am not optimistic about the price of gold, and it may accelerate.After the gold saw a big peak in 2011, the bottoming was a continuous sharp drop, so be careful when bargain-hunting.

Of course, the collapse of gold price is only a stress response to the Fed's interest rate hike. When inflation is stable and the economy needs support, interest rates will still decline. Therefore, friends who want to hold more gold for a long time should pay attention to the near-term risk aversion.

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