Gold prices are at a 3-month high relative to bitcoin as the Fed continues monetary-stimulus efforts

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  • Spot gold rose to $1,853.12 an ounce on Monday, the highest point since February 10.
  • Gold’s price relative to bitcoin is now at a three-month high as the cryptocurrency sells off.
  • Investors are flocking to gold amid fears of rising inflation and a weakening dollar from the Fed’s stimulus efforts.
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Gold prices rose to a three-month high Monday morning as investors have flocked to the safe-haven asset amid continued Federal Reserve stimulus that’s weakened the dollar.

Spot gold rose 0.5% to $1,853.12 an ounce on Monday, reaching the highest point since February 10, according to Bloomberg. The price movement came as bitcoin sank to nearly $42,000 after Elon Musk suggested Tesla may sell its holdings.

The ratio of gold’s price relative to bitcoin is up to the highest point since early February. One Bitcoin is now equivalent to about 23 ounces of gold bullion, down from a record of 36 ounces in April, according to Bloomberg data.

It’s likely that many investors may be buying gold as an alternative to a weakening dollar. The Federal Reserve has promised to keep interest rates near zero for the foreseeable future, which could weaken the US currency and strengthen the case for gold.

Gold has also been historically viewed as a hedge against inflation, and Wall Street has grown increasingly concerned that inflation will overheat as the US emerges out of the pandemic.

Cryptocurrency bulls argue that bitcoin’s fixed supply makes it an even better hedge against inflation than Gold, but recent price movements in both assets question this narrative.

Last week, when key inflation data came in significantly higher than expected, bitcoin fell 7% in one day, moving in the exact opposite direction as one would expect an inflation hedge to move. Bitcoin experts say they’re not concerned about day-to-day movements in the historically volatile cryptocurrency’s price.

Read more: UBS says to buy these 42 ‘new momentum’ stocks that are poised to outperform in a rising inflation environment

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The red-hot commodity market is being underappreciated in the long term by investors still obsessed with stocks, JPMorgan says

NYSE trader worried
  • Commodity prices have soared in recent months, but investors obsessed with the stock market don’t seem to care, according to a Wednesday note from JPMorgan.
  • Global investors only have 0.6% of their portfolios allocated to commodities excluding gold, below the average weighting.
  • If inflation continues to surprise to the upside, commodities will serve as a useful hedge for investors, JPMorgan said.
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Commodity prices have been surging in recent months as pent-up demand from consumers amid a reopened economy, combined with supply chain imbalances, created a perfect storm.

With inflation on the rise, investors should look to increase their commodity exposure as a hedge, according to a Wednesday note from JPMorgan.

Lumber prices have more than tripled in the past year as demand for housing and home renovations soar and Canada restricts the supply of timber from its forests. Oil prices have been on the move higher as demand for fuel jumps and a cyber attack cutoff one of the biggest pipelines in the US. And copper prices have more than doubled thanks to increased demand for it in electric vehicles and the supply chain failing to keep up.

This dynamic, in combination with easy year-over-year comparables, led the consumer prices index to surge 4.2% in April, representing its strongest reading in 13-years.

Despite the surge in inflation and the recent rise in commodities, JPMorgan found that investor allocation to the commodity ex-gold space stands at just 0.6%. That’s below its post-2009 average, and well-below the near-1% levels it stood at from 2010 to 2013.

At the same time, investors can’t seem to get enough of stocks, with equities allocations surging past its post-2008 average in recent months, according to JPMorgan.

“Investors are currently underweight commodities in global portfolios,” the bank said. This sets up equities to be more vulnerable than commodities from a positioning perspective.

Read more: ‘If lumber crashes, stocks might be next’: An award-winning portfolio manager who’s tracked lumber prices for years breaks down why futures hitting a record high of $1,600 is an ominous sign – and shares what investors can do ahead of the eventual crash

“Not only do commodities ex-gold look less vulnerable in the longer-term from a positioning point of view relative to the near-term, but they also look a lot less vulnerable relative to the equity asset class,” JPMorgan explained.

And if inflation continues to surprise to the upside in the coming months, commodities relative attractiveness in the long-term “becomes even stronger given investors’ perception of commodities as [a] better inflation hedge,” the JPMorgan concluded.

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Gold spikes as as ‘epic’ miss in April jobs report eases worries about a Fed rate hike

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Gold prices picked up Friday.

  • Gold prices climbed to their highest since early February on Friday following the April US jobs report.
  • The gain of 266,000 jobs was well below expectations of 1 million jobs being added to payrolls.
  • The data miss pushed Treasury yields lower, make gold more attractive to buy.
  • See more stories on Insider’s business page.

Gold prices jumped Friday after the weak US monthly jobs report tamped down expectations of an interest-rate hike by the Federal Reserve, making the metal more attractive to investors looking to buy.

Gold jumped as much as 1.5% to $1,842.59, the highest price since February 10. The surge was set off after the Labor Department said nonfarm payrolls grew by 266,000 last month, well below the estimated gain of 1 million from a Bloomberg survey of economists. Payrolls increased for a fourth consecutive month but the print was the smallest since September.

The poor jobs showing sparked questions about the strength of the US economy’s recovery from the COVID-19 pandemic and supported the view that the Federal Reserve will keep holding its benchmark interest rates near zero.

“You’re going to see that the labor-market recovery is likely to take a lot longer than anyone was anticipating and that will push off some people’s rate-hike expectations a little bit and that’s positive for gold,” Ed Moya, senior market analyst at Oanda, told Insider.

Investors swooped into the bond market after the data, driving yields lower. The 10-year Treasury yield sank to an intraday low of 1.4710% from 1.5610% on Thursday. Lower rates can brighten the appeal of gold as the metal offers no yield.

“This jobs print was a miss of epic proportions and yields reacted with a pretty sharp decline,” Sean Bandazian, an investment analyst at Cornerstone Wealth, told Insider, noting that what has moved gold historically is the level of real interest rates. Real yield refers to the level of the 10-year yield rate minus the rate of inflation.

“The real rate backed down to where it was in February and gold, given its inverse correlation, almost perfectly has moved up to where it was [three months ago],” said Bandazian.

“Gold is 45% correlated with the 10-year Treasury bond. As fears of a Fed tapering recede after the weak employment report … gold is moving higher,” wrote Jay Hatfield, founder and CEO of Infrastructure Capital Advisors.

The 10-year yield, meanwhile, pared its loss. It’s possible that the “excessive reaction this morning” in the bond market triggered stops on the short side of the 10-year bond after the yield dropped below 1.5%, said Bandazian.

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This gold-plated Nintendo Wii made for Queen Elizabeth II is selling on eBay, with a $300,000 asking price

Golden Nintendo Wii
The 24-Karat gold Nintendo Wii made for Queen Elizabeth II

  • A 24-Karat gold-plated Nintendo Wii made for Queen Elizabeth is selling on eBay.
  • The Queen never played the console, which was made by a video-game publisher as a publicity stunt.
  • Seller Donny Fillerup says experts have valued it at $1 million, but he has set an asking price of $300,000.
  • See more stories on Insider’s business page.

A gold-plated Nintendo Wii games console custom-made for Queen Elizabeth II has gone on sale on eBay for a $300,000 asking price.

THQ, a video game publisher that collapsed in 2013, made the 24-Karat gold-plated console in 2009 and sent it to the Queen as a marketing stunt, the seller, Donny Fillerup, told CNN.

But the Queen’s staff rejected the gift and sent it back, Fillerup said.

THQ folded in 2013 and a private buyer acquired their stock, which included the special-edition Wii.

The 24-Karat gold Nintendo Wii made for Queen Elizabeth II
The 24-Karat gold Nintendo Wii made for Queen Elizabeth II

Fillerup, who collects consoles, bought the special-edition Wii in 2017. He would not reveal how much he paid when asked by CNN.

He said the console was valued at $1 million by experts, but that he was happy with a lower price. Fillerup hopes to buy an apartment with the money from the sale.

“I want to be reasonable with buying a place for myself, and $300,000 (€250,000) is the price that I came up with. I don’t NEED more,” Fillerup said in an interview on his site Console Variations.

“Also, this gives more people the opportunity to buy it.”

Fillerup said in the eBay listing that the console was in working condition.

He told Insider he would provide authentication to any buyer – including the console’s serial number, documentation from a previous owner, and signatures from experts – before they complete the purchase.

“I hope the system goes to a good home. Hopefully a museum, or someone who will take care of it as much as I did,” Fillerup said in the interview with CNN.

The 24-Karat gold Nintendo Wii made for Queen Elizabeth II
The 24-Karat gold Nintendo Wii made for Queen Elizabeth II

Chris Bratt, a video-game journalist and YouTuber, tracked down the console as part of his People Make Games series, in 2019, and found it in the hands of Fillerup.

Fillerup said the console would be the subject of a documentary to be released later this year.

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Oil will surge 19% and copper will see double-digit returns over the next 6 months as economic reopening gives commodities a boost, Goldman says

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In this Photo illustration, the Goldman Sachs logo seen displayed on a smartphone.

  • Goldman Sachs said it expects commodities to stage double-digit rallies over the next six months.
  • Tailwinds include coronavirus restrictions easing worldwide, on top of lower interest rates and a weaker dollar.
  • The price of Brent crude oil could surge 19% while copper could rise 11%.
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Goldman Sachs expects commodities prices to stage double-digit rallies over the next six months as coronavirus restrictions ease across the world, aided by lower interest rates and a weaker dollar.

The bank in a note Wednesday said it predicts the price of Brent crude, oil’s international benchmark, to rise 19% to $80 a barrel and West Texas Intermediate crude to jump 20% to $77 a barrel.

“We expect the biggest jump in oil demand ever – a 5.2 [million barrels per day] rise over the next six months, 50% larger than the next largest increase over that time frame since 2000 and almost twice as large as the biggest 6 million supply rise since 2000,” analysts led by Jeffrey Currie said.

The analysts also upgraded their 12-month price target for copper to $11,000 per tonne, a jump of 11% from current levels. If the green capital expenditure is at the center of the commodity supercycle, they said copper is at the center of this trend. Copper is a critical raw material for green infrastructure and has an under-invested supply side, they said.

“The only way this record-sized and fast approaching supply crunch can be solved is via a surge in price to new record highs,” the analysts said. “We essentially see the copper market sleepwalking to a classic case of ‘Revenge of the old economy,’ just as oil did during the 2000s commodity boom.”

As for gold, the analysts see the price of the yellow metal rising 12% to $2,000 an ounce over the next six months, highlighting its “real use” compared to bitcoin.

“While bitcoin benefits from greater liquidity, it suffers from lack of real use and weak [environmental, social, governance] scoring due to its high energy consumption which makes it vulnerable to losing store of value demand to another better designed cryptocurrency,” the analysts said.

Edmund Moy, former Director of the US Mint and now chief market strategist at gold seller Valaurum, agreed.

“Cryptocurrencies like bitcoin are many things but I do not consider them a store of value yet because they do not have a long history of maintaining its value, the way gold has,” he told Insider. “I could change my mind…Ask me again in two thousand years.”

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US stocks tumble from record highs as tech shares drag indexes lower

Stock Market Traders
Traders work during the opening bell at the New York Stock Exchange (NYSE) on February 28, 2020 at Wall Street in New York City.

US shares slipped on Monday, falling from record highs last week as technology shares dragged indexes lower. Investors remain cautious over the slew of corporate earnings ahead as well as the ongoing vaccine rollout in the US.

Leading the downturn was Tesla, with shares falling as much as 6.5% following the fatal car crash in Texas Saturday, which left two people dead. The electric car maker was a big laggard on the S&P 500 and Nasdaq Composite Index.

The consumer and real estate sectors also weighed on the benchmark index trading as analysts and investors anticipate earnings from nearly 80 companies this week.

“Wall Street could be in for a few choppy trading weeks as more of the same strong earnings beats becomes the theme,” Edward Moya, senior market analyst at OANDA, said in a note. “The bar was set too low this earnings season, but then again no one really thought it was possible that the US would reach herd immunity by June.”

Moya said the financial markets will likely look to how the bond market is positioned, especially with no major economic data on the horizon. Given this, he expects the 10-year Treasury yield to rise towards the 1.70% level if economic recovery optimism remains strong, and to drop to the 1.53% level otherwise.

The 10-year Treasury yield climbed 3.2 basis points to 1.605% in the afternoon after rising to 1.617% Monday morning.

Bank of America said Treasury yields will likely climb to a two-year high this year despite recent stabilization.

“We think technical factors combined with revised expectations on US growth are mostly responsible for the recent stabilization in US rates,” said Bank of America in a note Monday. It added that the stabilization “subsequently justifies” a rally in emerging markets and US equities and a selloff in the US dollar.

Still, Ryan Detrick, chief market strategist for LPL Financial, is optimistic the stock market will come out of COVID-19’s shadows despite some concerns about the economy overheating.

“In the United States, vaccinations are increasing, the economy is expanding, unemployment is falling, and stimulus continues to flow through the economy,” he told Insider. “With the consensus crowding into an optimistic corner, many investors are wondering if sentiment may be running too hot.”

Here’s where US indexes stood at the 4:00 p.m. ET close on Monday:

Shares of GameStop rose 6% as the company announced that its CEO George Sherman will step down on July 31 or upon the appointment of a successor. Shares were already up even before the company’s announcement, boosted by the company’s progress in making major changes led by activist investor Ryan Cohen.

Nvidia shares sank as much as 4% after UK regulators said they will probe the company’s proposed $40 billion takeover of British chipmaker Arm over national security concerns.

Over the weekend, bitcoin slipped to 17% to its lowest since February but recovered on Monday, regaining some momentum to climb above the $55,000 level. Last week, the cryptocurrency hit an all-time high of over $64,000 on excitement over Coinbase’s direct listing.

But technical analyst Katie Stockton of Fairlead Strategies said bitcoin’s decline could set it up for further downside if a key technical support level is decisively breached.

“The 50-day (~10-week) MA is being tested, and we believe consecutive closes below it would increase risk of a test of support near $42,000,” Stockton said in a note.

China pivoted in its stance on bitcoin, calling the digital asset an “investment alternative” – a comment that Beijing insiders described as “progressive” – after years of cracking down on cryptocurrencies, CNBC first reported.

Oil prices steadied on Monday tempered by a weaker dollar, despite rising coronavirus infections globally. West Texas Intermediate crude rose 0.46% to $63.42 per barrel. Brent crude, oil’s international benchmark, climbed 0.43%, to $67.06 per barrel, at intraday lows.

Gold climbed as much as 0.39% to $1,770.94 per ounce.

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A NYC real-estate titan who learned about crypto from his teenage son has secured $6 billion in gold to back a new digital token

Real estate mogul Kent Swig.

  • Real estate mogul Kent Swig has landed $6 billion in gold reserves to back a new cryptocurrency, Bloomberg reported.
  • The token will be called DIGau and will be pegged to the market price of gold.
  • Swig said his interest in cryptocurrencies was stoked after learning from his teenage son.
  • See more stories on Insider’s business page.

New York City real estate titan Kent Swig is backing a new cryptocurrency and has landed at least $6 billion in gold reserves for the venture, according to a Bloomberg report.

Digital token DIGau’s value will be pegged to gold’s market price, guaranteed by liens against mining claims in Nevada and Arizona that were secured by Swig and his partner Stephen Braverman’s company, Dignity Gold.

Swig, 60, said he searched worldwide for gold assets for 18 months to secure the $6 billion of reserves.

“We’re not reinventing the wheel here. What we’re doing is applying the world’s stable backing of a lot of things to a very advanced technology,” Swig told Bloomberg in an interview published Tuesday.

Swig, who owns realty firm Brown Harris Stevens, said his interest in cryptocurrencies was piqued after his teenage son talked to him about the concept. Swig said DIGau will stand out as a gold-backed, U.S.-based crypto security that pays a dividend to token holders.

There’s been a jump in institutional interest in cryptocurrencies including at investment bank Morgan Stanley and electric vehicle maker Tesla. Wall Street on Wednesday is greeting Coinbase, the first cryptocurrency exchange to begin trading publicly.

Read more: Bitcoin is a headache to store, and that’s created an investment opportunity that could theoretically pay determined traders big risk-free returns by December

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A decline in bitcoin’s volatility makes it more attractive to institutions and supports a $130,000 long-term price target, JPMorgan says

A visual representation of the digital Cryptocurrency, Bitcoin is on display in front of the Bitcoin course's graph
A visual representation of the digital Cryptocurrency, Bitcoin is on display in front of the Bitcoin course’s graph.

  • A recent decline in bitcoin’s volatility could boost its adoption by institutions as a low-correlation asset that helps diversify investment portfolios, according to JPMorgan.
  • If bitcoin continues to see its volatility converge with gold’s volatility, it would fetch a long-term price target of $130,000, JPMorgan said in a note on Thursday.
  • “Mechanically, the bitcoin price would have to rise [to] $130,000, to match the total private sector investment in gold,” JPMorgan said.
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Bitcoin’s price volatility has been on the decline in recent weeks, making it more appealing to institutions that are seeking low-correlation assets to better diversify investment portfolios, JPMorgan said in a note on Thursday.

A boost in institutional adoption of bitcoin is “likely to arise from the recent change in the correlation structure of bitcoin relative to traditional asset classes,” the bank explained.

One of the biggest barriers to institutions adopting the cryptocurrency has been its markedly high volatility, which exploded in 2020 as bitcoin more than tripled. From a risk management point of view, high volatility “acts as a headwind towards further institutional adoption,” JPMorgan said.

Now, there are signs that bitcoin’s volatility is normalizing, which would help “reinvigorate” interest by professional investors to include the cryptocurrency in its asset allocations.

One asset that’s negatively impacted from bitcoin’s growing favor with institutions is gold, which has seen $20 billion in fund outflows since mid-October, compared to $7 billion in bitcoin fund inflows over that same time period, according to the bank.

“Considering how big the financial investment into gold is, any such crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin over the long term,” JPMorgan said.

That upside includes a long-term price target of $130,000, which represents potential upside of 121% from current levels.

“Mechanically, the bitcoin price would have to rise [to] $130,000, to match the total private sector investment in gold,” JPMorgan said, based on the current price of gold of $1,700 per troy ounce. JPMorgan previously had a $146,000 long-term price target for bitcoin, but that fell as gold’s price has recently fallen from a peak of $1,900 per troy ounce.

“The decline in the gold price since then has mechanically reduced the estimated upside potential for bitcoin as a digital alternative to traditional gold, assuming an equalization with the portfolio weight of gold,” the bank explained.

JPMorgan’s long-term price target for bitcoin is predicated on the idea that bitcoin’s volatility will converge with gold’s. That’s still far off from happening, as the three-month realized volatility for bitcoin recently stood at 86%, versus just 16% for gold.

“A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is likely a multi-year process. This implies that the above $130,000 theoretical bitcoin price target should be considered as a long-term target,” JPMorgan said.

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Cryptocurrency investors tend to be dog lovers, while gold bugs prefer cats, study shows

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  • Crypto holders are more likely to be dog lovers – and gold investors tend to be cat people, a study found.
  • Only about one-fourth of all crypto investors are women, highlighting a massive gender disparity.
  • More gold investors are likely to be married with children, while crypto holders tend to be single.
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Cryptocurrency holders are more likely to be dog-friendly, while those who lean on gold tend to be fans of cats, according to research by crypto exchange Xcoins.

As many as 45% of gold investors were found more likely to own a cat, and about 44% of crypto investors had a tendency to have dogs, data showed.

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Another notable highlight of the research is that only 28% of people that hold crypto are women, confirming the wide belief that the industry is male-dominated – with 72% of them being men. Meanwhile, gold investors are almost evenly split between men and women.

Data published by eEtoro last month showed only 15% of bitcoin traders are women. Although that’s a slight increase from the beginning of 2020, it still highlights the massive gender imbalance in the cryptocurrency world.

Xcoins’ CEO said it was important to bridge the gap between gender groups to facilitate mainstream adoption. “If bitcoin is to succeed in the mainstream, then it needs support from all demographics,” CEO Rob Frye said. “No-one is stopping women from entering, or investing the crypto space, but little is being done to encourage them either.”

Xcoins’ study also found that younger people aged between 16 and 34 are more likely to invest in cryptocurrencies, while those inclined towards gold are older than 34. This highlighted differences in investors’ marital status, showing gold investors are more likely to be married with children, while crypto investors tend to be single with no children.

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