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Create AccountGold vs Bitcoin, here we go again!
01 March 2024
In this week's market update:
In the news this week:
Precious metal prices have continued to trade in a narrow range over the last week, with gold edging to the upside, and again looking like it may push back above USD $2,050oz. The movements in gold are occurring against a backdrop of a stabilisation in bond yields, the strong performance of risk assets, and another surge in cryptocurrencies, most notably Bitcoin (more on this below), all of which could be expected to temper demand for precious metals given their safe-haven status.
Speculators also continue to unwind their long gold positions, with this segment of the market having cut their exposure by more than 40% in the last three months, despite the fact the gold price itself has held firm over this period.
Part of gold’s resilience in the face of such headwinds owes to continued to strong demand for physical bullion seen in China, with a World Gold Council update noting that gold and jewellery sales rose by almost 25% year on year during the Chinese New Year period.
In other news:
Gold vs Bitcoin comparisons are back in the news, which is no surprise given the 40% rally in the Bitcoin price that we have seen over the past month, with the best-known cryptocurrency now trading back above USD $60,000 per coin.
The move higher in Bitcoin has coincided with the launch of several spot Bitcoin ETFs in the United States, with these products collectively attracting billions of dollars of inflows.
While those who are already long Bitcoin will be hoping the current surge has much further to go, there are already signs it might soon run out of steam.
The below chart, shared by @themarketear highlights that Bitcoin now has an RSI of more than 87, the most overbought it has been since “forever”.
Moving on from the current price moves in Bitcoin, we see little similarity between Bitcoin and gold, despite the fact the former is often marketed as a digital version of the latter, or “gold 2.0”.
This was something we have written about in detail over the years, including an update from November 2022 which looked at the potential role of Bitcoin and gold in a portfolio.
That article noted several differences between the two asset classes, including their history, their performance across the full market cycle, their differing correlation to risk assets, their vastly different liquidity, volatility comparisons, and the differences in the market infrastructure and governance that surround trading in these asset classes.
We finished that article by noting that: “gold has a very long track record, having gone through multiple market cycles. The gold market is also very large, and highly liquid, turning over more than USD $100bn per day, as we alluded to earlier in this article. It has also helped improve risk adjusted returns for investors over many years, due to both the strong long-term returns it has delivered in its own right, and the fact its typically negatively correlated to risk assets during periods equity markets fall fastest. Given this background, a much more convincing case can be made that gold can play a strategic role in a diversified portfolio, something we highlight in our regular educational updates at ABC Bullion.”
Despite recent headlines and the renewed hysteria surrounding Bitcoin, we think the above comments about gold hold as true today as when they were written.
Inside the office
Despite the lack of decisive price movement, investors continue to snap up physical precious metals, with ABC Bullion seeing solid two-way trade across all its investment channels, including our website abcbullion.com and inside our Australia wide locations including our Global Flagship store at Martin Place.
Given overall market sentiment, and near record prices for gold in Australian dollars, it’s no surprise that buybacks of precious metals remain at healthy levels, with some investors simply locking in profits, others using precious metals a source of liquidity to fund other deals, and some paying down debt given the higher interest rate environment.
On the buy side, the catalysts for precious metal demand remain a desire to hedge against emerging risks in the economy, as well as protect against likely market volatility given how fast and how hard risk assets have run in recent times.
There are also those simply looking to profit from the momentum in the precious metal market, with a range of indicators suggesting gold is about to rocket higher. That sentiment is felt even more strongly by silver investors, with the gold to silver ratio, which has again touched 90 this week, suggesting silver could be on the cusp of a major bull market.
For those looking to access silver, coins remain one of the most popular products, with ABC Bullion offering a range of coins with reduced premiums, including Canadian Maples, Krugerrands and Britannia’s.
Gold buyers on the other hand continue to acquire ABC Bullion’s cast bar gold range, pool allocated metals, as well as our minted tablets, especially for those buying in store or who like to buy gold in smaller product sizes.
We’ve also been pleased to see continued sign ups to the ABC Bullion Gold Saver, which remains a popular choice for those looking to access the gold market through what a ‘set and forget’ product that can be set up in minutes.
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Jordan Eliseo
General Manager
ABC Bullion Australia
Disclaimer: This document has been prepared by Australian Bullion Company (NSW) Pty Limited (ABN 82 002 858 602) (ABC). The information contained in this document or internet related link (collectively, Document) is of a general nature and is provided for information purposes only. It is not intended to constitute advice, nor to influence any person in making a decision in relation to any precious metal or related product. To the extent that any advice is provided in this Document, it is general advice only and has been prepared without taking into account your objectives, financial situation or needs (your Personal Circumstances). Before acting on any such general advice, we recommend that you obtain professional advice and consider the appropriateness of the advice having regard to your Personal Circumstances. If the advice relates to the acquisition, or possible acquisition of any precious metal or related product, you should obtain independent professional advice before making any decision about whether to acquire it. Although the information and opinions contained in this document are based on sources, we believe to be reliable, to the extent permitted by law, ABC and its associated entities do not warrant, represent or guarantee, expressly or impliedly, that the information contained in this document is accurate, complete, reliable or current. The information is subject to change without notice, and we are under no obligation to update it. Past performance is not a reliable indicator of future performance. If you intend to rely on the information, you should independently verify and assess the accuracy and completeness and obtain professional advice regarding its suitability for your Personal Circumstances. To the extent possible, ABC, its associated entities, and any of its or their officers, employees and agents accepts no liability for any loss or damage relating to any use or reliance on the information in this document. It is intended for the use of ABC clients and may not be distributed or reproduced without consent. © Australian Bullion Company (NSW) Pty Limited 2020.
- Precious metal markets were mixed this week, with gold recording a +1% move in USD terms, last trading at USD $2,044 per troy ounce (oz), while in AUD terms, it is now trading back above $3,100oz, near prior all-time highs.
- Silver remained on the back foot, last trading at USD $22.60oz, -2% for the week, with the gold to silver ratio now back at 90. In Australian dollar terms, silver has again fallen below $35oz, a price point that has provided support in recent periods.
- Equity and commodity markets were non-eventful over the past five trading days, with the S&P 500 and ASX200 almost unchanged, while oil is still trading below USD $80 per barrel.
- Bond yields eased marginally this week, with US and Australian 10-year government bonds falling by 5 and 6 basis points respectively, though both are higher over the past month and year.
- Cryptocurrencies were again front-page news in the investment world, with Bitcoin surging back above $60,000 per coin. Sharp price rallies like this bring out inevitable comparisons between Bitcoin and gold, as we discuss in this week’s update.
In the news this week:
Precious metal prices have continued to trade in a narrow range over the last week, with gold edging to the upside, and again looking like it may push back above USD $2,050oz. The movements in gold are occurring against a backdrop of a stabilisation in bond yields, the strong performance of risk assets, and another surge in cryptocurrencies, most notably Bitcoin (more on this below), all of which could be expected to temper demand for precious metals given their safe-haven status.
Speculators also continue to unwind their long gold positions, with this segment of the market having cut their exposure by more than 40% in the last three months, despite the fact the gold price itself has held firm over this period.
Part of gold’s resilience in the face of such headwinds owes to continued to strong demand for physical bullion seen in China, with a World Gold Council update noting that gold and jewellery sales rose by almost 25% year on year during the Chinese New Year period.
In other news:
- The Malaysian Gold Association (MGA) have forecast an increase in the gold price to USD $2,200oz this year, with part of the expected price increase expected to be driven by continued strong demand for gold from emerging market central banks. Geopolitical tensions and the potential for an escalation in conflict seen in the Middle East are also expected to keep gold well bid in certain physical markets.
- The most recent Saxo Bank update noted the fact that gold has defied the changing expectations of the market as it relates to short-term interest rates, with investors no longer quite so confident the US Federal Reserve (the Fed) will deploy a slew of interest rate cuts in 2024. Indeed, recent pricings.
- Silver looks incredibly cheap, with a recent video update from Sprott looking at the multiple catalysts that could see the precious metal surge in the coming months. This includes its multiple industrial applications, while on the supply side, the outlook is far more uncertain, with Sprott also noting that the current gold to silver ratio suggests silver is uncertain.
- We are also seeing certain deep pocketed investors turn to gold mining stocks, which is typically a good sign for the overall precious metal market.
Gold vs Bitcoin comparisons are back in the news, which is no surprise given the 40% rally in the Bitcoin price that we have seen over the past month, with the best-known cryptocurrency now trading back above USD $60,000 per coin.
The move higher in Bitcoin has coincided with the launch of several spot Bitcoin ETFs in the United States, with these products collectively attracting billions of dollars of inflows.
While those who are already long Bitcoin will be hoping the current surge has much further to go, there are already signs it might soon run out of steam.
The below chart, shared by @themarketear highlights that Bitcoin now has an RSI of more than 87, the most overbought it has been since “forever”.
Moving on from the current price moves in Bitcoin, we see little similarity between Bitcoin and gold, despite the fact the former is often marketed as a digital version of the latter, or “gold 2.0”.
This was something we have written about in detail over the years, including an update from November 2022 which looked at the potential role of Bitcoin and gold in a portfolio.
That article noted several differences between the two asset classes, including their history, their performance across the full market cycle, their differing correlation to risk assets, their vastly different liquidity, volatility comparisons, and the differences in the market infrastructure and governance that surround trading in these asset classes.
We finished that article by noting that: “gold has a very long track record, having gone through multiple market cycles. The gold market is also very large, and highly liquid, turning over more than USD $100bn per day, as we alluded to earlier in this article. It has also helped improve risk adjusted returns for investors over many years, due to both the strong long-term returns it has delivered in its own right, and the fact its typically negatively correlated to risk assets during periods equity markets fall fastest. Given this background, a much more convincing case can be made that gold can play a strategic role in a diversified portfolio, something we highlight in our regular educational updates at ABC Bullion.”
Despite recent headlines and the renewed hysteria surrounding Bitcoin, we think the above comments about gold hold as true today as when they were written.
Inside the office
Despite the lack of decisive price movement, investors continue to snap up physical precious metals, with ABC Bullion seeing solid two-way trade across all its investment channels, including our website abcbullion.com and inside our Australia wide locations including our Global Flagship store at Martin Place.
Given overall market sentiment, and near record prices for gold in Australian dollars, it’s no surprise that buybacks of precious metals remain at healthy levels, with some investors simply locking in profits, others using precious metals a source of liquidity to fund other deals, and some paying down debt given the higher interest rate environment.
On the buy side, the catalysts for precious metal demand remain a desire to hedge against emerging risks in the economy, as well as protect against likely market volatility given how fast and how hard risk assets have run in recent times.
There are also those simply looking to profit from the momentum in the precious metal market, with a range of indicators suggesting gold is about to rocket higher. That sentiment is felt even more strongly by silver investors, with the gold to silver ratio, which has again touched 90 this week, suggesting silver could be on the cusp of a major bull market.
For those looking to access silver, coins remain one of the most popular products, with ABC Bullion offering a range of coins with reduced premiums, including Canadian Maples, Krugerrands and Britannia’s.
Gold buyers on the other hand continue to acquire ABC Bullion’s cast bar gold range, pool allocated metals, as well as our minted tablets, especially for those buying in store or who like to buy gold in smaller product sizes.
We’ve also been pleased to see continued sign ups to the ABC Bullion Gold Saver, which remains a popular choice for those looking to access the gold market through what a ‘set and forget’ product that can be set up in minutes.
Jordan Eliseo
General Manager
ABC Bullion Australia
Disclaimer: This document has been prepared by Australian Bullion Company (NSW) Pty Limited (ABN 82 002 858 602) (ABC). The information contained in this document or internet related link (collectively, Document) is of a general nature and is provided for information purposes only. It is not intended to constitute advice, nor to influence any person in making a decision in relation to any precious metal or related product. To the extent that any advice is provided in this Document, it is general advice only and has been prepared without taking into account your objectives, financial situation or needs (your Personal Circumstances). Before acting on any such general advice, we recommend that you obtain professional advice and consider the appropriateness of the advice having regard to your Personal Circumstances. If the advice relates to the acquisition, or possible acquisition of any precious metal or related product, you should obtain independent professional advice before making any decision about whether to acquire it. Although the information and opinions contained in this document are based on sources, we believe to be reliable, to the extent permitted by law, ABC and its associated entities do not warrant, represent or guarantee, expressly or impliedly, that the information contained in this document is accurate, complete, reliable or current. The information is subject to change without notice, and we are under no obligation to update it. Past performance is not a reliable indicator of future performance. If you intend to rely on the information, you should independently verify and assess the accuracy and completeness and obtain professional advice regarding its suitability for your Personal Circumstances. To the extent possible, ABC, its associated entities, and any of its or their officers, employees and agents accepts no liability for any loss or damage relating to any use or reliance on the information in this document. It is intended for the use of ABC clients and may not be distributed or reproduced without consent. © Australian Bullion Company (NSW) Pty Limited 2020.
