2024-09-08 News

Gold Dips to $1630, US Stocks Down Over 100 Points, A50 Falls 13% in a Month

Today marks the start of the Federal Reserve's meeting, with the market buzzing about the future pace of interest rate hikes by the Fed. However, the probability of a 75 basis point rate hike by the Fed has further increased.

This has led to a continuous decline in the price of international gold, which has now reached a level of $1,630.

Although European stock markets closed with gains and losses yesterday, the three major U.S. stock indices fell in sync last night, with the Nasdaq and Dow Jones both dropping by more than 100 points.

The performance of the FTSE China A50 index traded overseas has also been poor recently. After the Shanghai Composite Index broke below 2,900, where will it go from here?

01

Previously, the market's focus on the Fed's interest rate hikes was whether the pace would slow down in December, but now it's even uncertain how the rate hike will be in November.

Some time ago, models predicting the Fed's rate hikes showed that the probability of a 50 basis point hike in November was continuously increasing, while the probability of a 75 basis point hike was gradually decreasing.

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In the previous trading session, the probability of a 75 basis point rate hike by the Fed had already dropped to 80%, and yesterday this probability significantly increased to 87.8%; the probability of a 50 basis point hike, on the other hand, fell from nearly 20% to 12%.

It seems that the market is gradually forming a consensus that the Fed will still raise interest rates by 75 basis points in November.

The previous rate hikes have already had a severe impact on the economy. How the Fed will view this can only be speculated after waiting for the official statement following the Fed's meeting.Even with this rate hike of 75 basis points, analysts still believe that the Federal Reserve will have a more noticeable shift in attitude.

02

Under the suppression of the continuously rising US Dollar Index, the price of international gold has already experienced a decline for seven consecutive months.

The chart above is the monthly chart of international gold prices, with the two peaks occurring in August 2020 and March 2022, respectively.

The emergence of the previous peak was due to the Federal Reserve's previous loose monetary policy, which led to an overflow of market liquidity and pushed up the prices of commodities. At this time, the trend of gold prices still had a certain inflation-resistant attribute.

The second peak occurred after the European conflict, reflecting the safe-haven attribute of gold. Due to the rapid influx of funds, the gold price, which was originally in a downward channel, suddenly rose significantly.

However, since then, the price of international gold has continued to decline for seven consecutive months.

Recently, due to the Federal Reserve's imminent rate hike, the US Dollar Index has strengthened again, leading to a continued decline in the price of national gold, which has now reached a position of $1630, and it may break through the recent low after the US rate hike.

03

Similarly declining are the US stocks. Last night, the three major US stock indices fell in sync, with the Nasdaq experiencing the largest drop, exceeding 1%.Despite this, yesterday, as the last trading day of October, still brought good news for investors. The Dow Jones Industrial Average surprisingly rose by nearly 14% for the entire month, marking the best monthly performance in nearly 50 years.

The S&P 500 Index also rose by 8% in October, currently returning above 3,800 points.

Similarly, the Nasdaq Index rose, but its performance was slightly worse, with a 3.9% increase for the month. This is quite related to the less-than-ideal financial reports announced by major tech giants, which led to significant declines.

Previously, after META and Amazon announced their financial reports, they both experienced substantial drops.

Conversely, some banking stocks performed well, which should also be one of the reasons for the highest increase in the Dow Jones Index.

The FTSE China A50 Index fell by 12.3% in October, which is the largest decline in this index futures in recent months.

The decline in March of this year could have been the largest, but a rapid rebound in the latter half of March narrowed the decline.

Therefore, the last time the decline exceeded 10% dates back to July of last year.

Looking at the trends of various A-share indices, we also find that the Shanghai Stock Exchange 50 Index and the CSI 300 Index are weaker, indicating a downward trend for large-cap stocks. In contrast, the CSI 500 and CSI 1000 are relatively more resistant to declines, and funds still favor the small and mid-cap style.

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