Author: New Frontline of Finance
On July 14, CCTV News reported that on July 13, 2024, local time, a shooting occurred during the speech given by former US President Trump at a campaign rally in Pennsylvania. Trump was shot in the upper part of his right ear by a bullet. One of the gunmen involved in the case has been shot dead by the Secret Service, and another rally participant died.
The heat of related events quickly grew, and under the transmission effect of risk events, the opening performance of the US and global financial markets on July 15 (Monday) received more attention.
In recent times, the uncertainty of monetary policy brought about by the 2024 US presidential election and the rising expectations of the Federal Reserve's interest rate cuts have intensified the price fluctuations of various asset markets. Among them, gold once again stood above the $2,400/ounce mark. After the shooting of Trump, Bitcoin, which is regarded as "digital gold" by supporters, also broke through the $60,000 mark.
Good news for gold, but limited sustainability
Earlier, data released by the U.S. Department of Labor showed that the U.S. CPI rose 3% year-on-year in June 2024, a 0.3 percentage point narrower than in May; the CPI fell 0.1% month-on-month in June, the first month-on-month decline in the CPI since May 2020. Excluding volatile food and energy prices, the core CPI rose 0.1% month-on-month in June and 3.3% year-on-year.
CPI data continued to fall, and the market's expectations for the Fed's September rate cut increased, and the financial market reacted strongly. After the release of the relevant data, on July 11, the London spot gold price broke through the $2,400/ounce mark for the first time since May 22. COMEX gold futures rose nearly 2% during the day, and finally closed up 1.74%.
According to Wind data, on July 12, the two major gold quotations fell slightly, with London spot gold closing down 0.17% at $2,410.61 per ounce; COMEX gold closed down 0.24% at $2,416 per ounce.
Since March 2024, gold has repeatedly refreshed its historical highest trading price, and COMEX gold reached a peak of $2,454/ounce in May 2024. As the Federal Reserve decided to slow down the pace of interest rate hikes in June and the People's Bank of China suspended its 18-month gold purchases, COMEX gold fell to a minimum of around $2,305/ounce in June.
According to trading rules, spot gold and futures gold markets are suspended on weekends. How will the Trump shooting affect gold prices? Yang Haiping, a researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics, believes that the impact of Trump being shot at a campaign rally on the financial market can be analyzed at two levels. On the one hand, this sudden incident brings market uncertainty, increases investors' risk aversion, and may increase the allocation of risk-averse assets, which may be one of the driving factors for the rise in gold prices in the short term.
"On the other hand, the shooting may increase the probability of Trump's election. Therefore, from a medium-term perspective, the market may make arrangements based on Trump's policy tendencies," Yang Haiping added.
Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, said that the recent unexpected decline in US inflation and the unexpected interest rate cut statement by the Chairman of the Federal Reserve, as well as the shooting incident at a US campaign rally, have a positive impact on the short-term trend of gold. The former has triggered market expectations that the Federal Reserve will start a rate cut cycle this year, and the decline in market interest rates will help reduce the opportunity cost of holding interest-free gold; while the latter has increased the uncertainty of the US political outlook, which may bring uncertainty to the US economic and policy prospects in the next few years. The increase in market volatility is beneficial to safe-haven assets to a certain extent, but it depends on the actual depth and breadth of the impact of the event.
However, Xue Hongyan, deputy director of Xingtu Financial Research Institute, pointed out that major global emergencies are generally good for gold, but the market trend is limited in sustainability. The US CPI fell more than expected, and the Fed's interest rate cut expectations increased, which is good for gold performance. However, gold has repeatedly traded and reacted to the Fed's interest rate cut in the early stage, so the momentum for the gold rally is insufficient.
Regarding the trend of gold in the next stage, Zhou Maohua believes that in the short term, gold still has support, US consumption and prices are slowing down, and the market's expectations for the Fed to start a rate cut cycle are rising. The continued geopolitical conflict, the uncertainty of the political prospects of Europe and the United States, coupled with the US debt risk and the long-term downward trend of US credit, etc., support the short-term trend of gold. However, it is necessary to pay attention to the fact that gold is currently at a historical high, and the market has reacted to geopolitical conflicts to a large extent. In order to cope with "sticky inflation", Europe and the United States maintain restrictive interest rates and a relatively strong dollar. Gold faces headwinds, and the uncertainty of inflation and policy paths in Europe and the United States may exacerbate price fluctuations.
Bitcoin surges higher, price volatility will be greater than traditional assets
Under the influence of sudden risk events, in addition to gold, a traditional safe-haven asset, the trend of Bitcoin, which is regarded as "digital gold", has also become a focus of attention. Earlier, Bitcoin was once regarded as a type of financial safe-haven asset that can hedge against global economic uncertainty and price increases, but judging from the actual market reaction in the past, the safe-haven attribute of Bitcoin has not been reflected in various risk events.
Since June, Bitcoin has been on a clear downward trend, falling below several thousand-dollar levels from a high of around $71,000, with the lowest falling below $55,000, triggering a huge liquidation and driving a "dive" in the cryptocurrency market. Starting from July 9, Bitcoin rebounded, and after the release of the US CPI data, it once jumped close to the $60,000 mark, and then showed a volatile downward trend.
On July 14, Bitcoin once again hit the $60,000 mark several times amid fluctuations. CoinGecko data showed that after the news of the shooting broke out and continued to ferment, Bitcoin's gains expanded, reaching a high of $60,347.17 within 24 hours. As of 14:30 on July 14, Bitcoin was priced at $60,132.22, a 24-hour increase of 3.4%.
Yu Jianing, co-chair of the Blockchain Committee of the China Communications Industry Association, said that the US CPI in June fell for the first time since May 2020, which directly affected the market's expectations for inflation and monetary policy. This has provided some support for risky assets including Bitcoin, stimulating price increases in the short term. The shooting incident of Trump further increased market uncertainty. Such events often trigger risk aversion, causing investors to oscillate between seeking safe assets and high-risk assets. Bitcoin has also experienced price fluctuations under the transmission effect of risk events.
"Such political emergencies will inevitably have an impact on the US presidential election, and Trump's support for crypto assets in this election has also made the crypto market optimistic to a certain extent," Yu Jianing added.
Chen Jia, an independent international strategy researcher, pointed out in the report that as the US presidential election has entered a white-hot stage recently, major events in the international financial market have fueled the situation. In addition, the attack on Trump has also pushed up the market's valuation expectations for various categories of Bitcoin spot trading and Bitcoin spot ETFs. The regulatory attitudes towards Bitcoin and other crypto assets in the United States are divided, and the inherent contradictions in Bitcoin investment demand are also becoming increasingly intensified. If the volatility of Bitcoin trading prices intensifies in the future, its inherent political factors will have a profound impact on the development of Bitcoin and even the entire crypto asset industry.
Yu Jianing bluntly stated that the high volatility of the Bitcoin market itself also amplifies the impact of these external events. Compared with traditional financial markets, the liquidity of the Bitcoin market is relatively low, and market sentiment is easily affected by news events and market dynamics. This means that when the market faces major news or economic data releases, Bitcoin price fluctuations may be more drastic than traditional assets. Recent political events have also demonstrated the market's sensitivity to emergencies, and investors need to remain vigilant.
