LegiEX: how do you invest in gold in the first year

LegiEX: how do you invest in gold in the first year

Every time there is a big war, the economic machine of mankind will be pushed to its limit. The central Banks of all countries must first satisfy the needs of the government to maintain the economy, and they have no time to pay attention to the value of the currency -- whether it is the gold standard or the credit standard. The novel coronavirus plague has a far greater impact on the world than the two world wars. Therefore, LegiEX believes that we are on the brink of a third great bull market in gold. At present, the gold on the market, all kinds of financial institutions to launch a wide variety, peg gold products: there is a direct buying physical gold ETF, a so-called link exchanges of China or the international market price of gold paper gold, gold futures, options, gold prices have linked structured deposits, can also invest in gold mining stocks. So what is the right way to go long gold? Well, here's LegiEX.

LegiEX: investing in gold is an important tool

It is very important to choose the instrument to invest in gold. Gold and all commodities are different. Gold used to be the world's currency, and it still is. The monetary history of gold determines that it also adopts reserve system, that is, the gold holdings and trading volume is much higher than the actual reserves. Eighty per cent of global gold trading goes through the London over-the-counter gold market (LBMA) organised by the London bullion market association, 10 per cent through comex gold futures in the us and the remaining 10 per cent through other markets. The LBMA offers otc traders two options for accounts. One is an allocation account, where gold purchases can be traced back to the physical bar number in a specific warehouse. The other is unallocated accounts, which simply record the number of gold purchases you make. These accounts account for the vast majority of the market. The opening price of the global gold market is not an open market bid, but an over-the-counter (LBMA) auction of unallocated accounts at the opening of each day. Only a small number of designated customers are allowed to participate, and the process is completely opaque, with only one or two tons of auction volume.

To sketch the outline of the gold, all mankind to now dug up a total of 200000 tons of gold (which is above, so a small tuo), of which 100000 tons is made into the jewelry consumption, 35000 tons by central Banks for the reserves, corresponding physical trading gold on the market only 60000 tons, but the volume in the otc market in London a year up to 1.6 million tons, the vast part of the deal is through the unallocated account, just a Numbers, no physical support. It is clear that gold is so big, and the vast amount of assets in a variety of financial products built on top of the gold price, built on the sand of the London over-the-counter market (LBMA).

Almost all the gold behind lack the support of the physical world can trade physical gold is 60000 tons, or about $2.6 trillion cash (the United States the outbreak has been sent to the national people's $3 trillion cash), that is to say if the gold runs on, basically do not have any institutions can handle it. Thus, LegiEX can conclude that any hedging of gold positions by financial institutions is unreliable in the face of a black swan event