Gold, stock, USD, bitcoin prices all plummet: The strangest thing is happening

Assets depreciate across the board

The world stock market just experienced a terrible trading session on August 5, arguably the worst in decades.

The most disastrous was the Japanese stock market when the Nikkei 225 index fell dramatically, losing 4,451.28 points (equivalent to a decrease of 12.4%), far surpassing even "Black Monday" in 1987 - once considered a black mark in global financial history.

Shares of major banks such as Mizuho, ​​Mitsubishi UFJ and Sumitomo Mitsui all fell about 15% in trading on August 5. Chiba Bank shares even plunged 19%.

Since the beginning of July, Japan's Nikkei 225 index has fallen 24% and officially entered a downtrend.

Taiwan stocks fell more than 8%. South Korea's KOSPI index also evaporated at a similar rate, with trading halted for dozens of minutes during the session.

Many other Asian stock markets plunged, including Vietnam's VN-Index, which lost nearly 50 points, with about $8 billion in capitalization evaporated.

US stocks continued to fall sharply in the trading session on August 5 (evening of August 5, Vietnam time) after a continuous decline. By 9:00 p.m. on August 5, the US Nasdaq industrial index fell another 600 points (equivalent to a decrease of 3.7%), down to 16,160 points. This index reached 18,650 points on July 10. Thus, the Nasdaq Composite has decreased by more than 13% so far.

In the crypto market, digital currencies also plummeted. Bitcoin in the session on August 5 at one point broke the $50,000 mark, reaching a 6-month low of $49,300/BTC (early afternoon of August 5, Vietnam time), while the second largest currency Ether had its sharpest decline in nearly three years.

In just one day, Bitcoin lost about 14% of its value.

One surprise was that gold prices plummeted, losing about $90 (3%) to $2,364 an ounce, from $2,454 an ounce previously.

Gold prices plummeted despite the rare fall in the value of the USD. The DXY index - which measures the USD's fluctuations against a basket of six major currencies in the world - lost 0.8% at the opening session on August 5 (New York market) to 102.5 points. At the end of July, the DXY index was at 105 points.

Oil prices were also miserable. At the opening session on August 5 on the New York market, WTI oil prices fell by 0.9 USD (equivalent to a decrease of 1.2%), down to 72.6 USD/barrel.

Contrary to common law

It is a fact that many assets denominated in USD, such as gold and oil, have fallen in price despite the sharp decline in the USD.

This development is contrary to the usual rule: When the USD increases, gold decreases and vice versa, when the USD decreases, gold increases.

It also contrasts with what is happening in the world. Geopolitical tensions are escalating everywhere and the risk of a fierce war could happen in the Middle East, as Iran repeatedly announced that it would respond to the assassination of a Hamas leader in the capital Tehran on July 31.

Normally, escalating geopolitical tensions would send gold prices soaring. However, the session on August 5 showed the opposite. Gold fell freely as the USD plunged and the conflict escalated to a red alert level.

This is considered a rare phenomenon in the world financial market.

There are not many explanations for this development. However, history has witnessed sell-offs in the stock markets, along with a decline in gold prices. When the stock market plummeted, many organizations and investors holding gold sold this commodity to cover stock losses.

The phenomenon of gold, USD, Bitcoin, stocks... falling simultaneously can also be explained as a bubble forming. Assets have been inflated over the past few years, including USD, gold and stocks.

In fact, in the first 7 months of the year, US stocks continuously set new records. The USD also climbed and hung at a high level even though the US Federal Reserve (Fed) was about to enter a cycle of interest rate cuts. Gold prices skyrocketed from the end of 2023 and set many all-time high records.

Many legendary investors have been cautious about assets, especially the stock market, in recent weeks. Warren Buffett’s company has been selling off many types of US stocks, including Apple, bringing its cash to a record $277 billion; at the same time, it has sold billions of dollars of Bank of America shares.

The question is, if everything goes down, where does the money go?

In fact, the amount of cash in the market does not fluctuate much, the money in the pockets of organizations and tycoons remains the same... However, caution in the face of risks can reduce the speed of cash-asset turnover, so the market price of assets can decrease. Stock prices, gold prices, Bitcoin prices and even USD prices also shrink.

Money may also flow into other assets such as US government bonds and the yen as the Japanese currency suddenly rebounds after a long decline.

Billionaire Warren Buffett's Berkshire has just made a huge profit from high interest rates on US government bonds.

The Japanese yen continued to appreciate by more than 2% on August 5, reaching 142.2 yen per dollar. In July, the yen had increased by 8%, from 162 yen to 1 dollar. The yen jumped against the greenback after the Bank of Japan (BOJ) raised its reference interest rate for the second time this year, to around 0.25%/year. Previously, the BOJ maintained negative interest rates for a decade.