Gold prices have jumped more than 10% since the start of April to nearly $1,900 per ounce. Since the start of May alone, gold is up roughly 7%.
According to Sophie Griffiths, a market analyst for the FX solutions provider OANDA, the rise in prices is a result of “falling Treasury yields and a softer tone surrounding the greenback.”
Griffiths also said that a recent cryptocurrency sell-off could have pushed investors toward gold amid inflation concerns.
According to Cameron Brandt, the Director of Research at EPFR, an Informa Financial Intelligence business, flows into gold hit 19-week highs in the third week of May as well.
A new research report from Commerzbank also shows gold ETFs tracked by Bloomberg have registered almost continuous inflows for the last 2.5 weeks.
Daniel Briesemann, a precious and industrial metals analyst at Commerzbank, said in the new report that “speculative financial investors are also betting increasingly on rising gold prices.”
Traders have expanded their net long positions in gold for the third week in a row and net longs are now 82% higher than they were at the start of May, according to data from the report.
Briesemann said that he believes there is still “upside potential” in the gold market due to the Fed’s insistence on maintaining “ultra-expansionary monetary policy.”
He also said gold could see support from increased Chinese government buying throughout this week.
Despite the recent rise in gold prices, the precious metal still trades below where it did nearly a decade ago in September of 2012. Since the end of 2018, however, Gold is up roughly 40%.
Gold isn’t the only precious metal on the move, either.
Copper prices are up some 87% over the past year. The commodity has made a slight retreat over the past two weeks, but experts are still calling it the new oil and making predictions for the price to hit $15,000 per ton by 2025.
As bitcoin continues its meteoric rise, breaching new records and crossing the $1 trillion market capitalization mark in just the last week, more investors are assessing the longstanding comparison between the famous cryptocurrency and an equally well-known asset class: gold.
Both assets, experts say, are often seen as ways to diversify a portfolio or as a hedge against fiat currency inflation brought about by what some observers see as unsustainable fiscal and monetary policies.
Yet, until recently, it was rare to see Wall Street analysts, chief executives, or established investors seriously compare the two assets. Bitcoin, commonly referred to as digital gold, has historically been seen as a risky speculative investment for those looking to profit in the short term. Gold, meanwhile, has always been considered a safe-haven asset.
Now, bitcoin’s rapid ascent to over $57,000 per coin, backed by new investments from Tesla and other institutional names, has led some to question whether old assumptions about these assets are correct.
Given digital currencies’ dizzying climb, Insider surveyed 10 experts to see if they’d rather hold bitcoin or gold for the next 10 years, and why. We asked bitcoin bulls, gold lovers, analysts, executives, and more.
“My vote would be for gold because it has thousands of years of a historical record as a store of value, has one-fifth the volatility of bitcoin, and doesn’t face the same competition risk. The day that Queen Elizabeth trades in the five pounds of gold in her crown for crypto is the day I’ll shift course.” – David Rosenberg of Rosenberg Research, former Chief Economist and Strategist for Merrill Lynch Canada and Merrill Lynch in New York
“Gold and silver have been stores of value and mediums of exchange for at least 4 millennia in every civilization in every corner of the world. It has unmatched accessibility to people of all economic standing and technological knowledge. And gold is the ultimate currency of central banks, silver of the people. There is room for cryptocurrencies too since their digital nature is a fundamental difference from gold and silver. But that characteristic also ensures that cryptocurrencies will never replace gold and silver and will ultimately improve the metal’s value.” – Phil Baker, President and CEO, Hecla Mining Company
“Gold has long been considered to be the safe-haven asset of choice, and, while bitcoin is ‘the new kid on the block,’ it’s debatable that it will eat into gold’s market share for a number of reasons. Bitcoin and gold both have significant advantages over fiat currencies because neither can be diluted or debased. There is a possibility that bitcoin could one day cease to exist through hostile legislation. Some bitcoin derivatives have already been banned. Companies such as Facebook who have attempted to start crypto have been prevented from doing so. So, while bitcoin is a more recent form of investment that is certainly receiving a lot of hype, gold has retained its value through centuries. Whether bitcoin will offer the same level of longevity is highly questionable.” – Sylvia Carrasco, CEO and founder of the gold exchange platform Goldex.
“One of the assumptions underlying bitcoin’s bull case is its limited supply, but the supply of cryptocurrencies, on the whole, is theoretically unlimited. Some extol bitcoin as a portfolio diversifier, but it has so far exhibited higher correlations to equities than gold, particularly during periods of equity market stress when diversification tends to add the most value. The demand for bitcoin may be over its skis relative to its likelihood to carve out a significant economic or financial use case.” – Michael Reynolds, Investment Strategy Officer at Glenmede.
“Both crypto and gold have passionate investor bases… However, there are very clear differences. Gold’s history as a basic building block of global money is 5,000 years old and time-tested; Bitcoin is 10 years old and has existed in only one monetary regime. The standard deviation of bitcoin’s price is 75%, making it a horrible store of value. Recent price history shows a large bias toward speculative interest, so much so that companies are tempted to include bitcoin on corporate balance sheets to help grow assets in excess of corporate performance. Crypto is a poor monetary substitute. In the US, filing your taxes requires a voluntary disclosure of your cryptocurrency profits. If a crypto trade automatically generated a statement to the IRS as a brokerage transaction does, the speculative outlook could dim.”- Robert Minter, Director of Investment Strategy, Aberdeen Standard Investments
“Bitcoin is a 100x improvement over gold as a store of value. The world is realizing this and beginning to reprice digital currency in real-time. Although bitcoin has increased hundreds of percent in the last few months, it is likely to continue appreciating in US dollar terms over the coming years. I suspect that bitcoin’s market cap will surpass gold’s market cap by 2030. For this reason, I own no gold and have a material percent of my net worth invested in bitcoin.” – Anthony Pompliano of Pomp Investments and Morgan Creek Digital Assets
“The crypto bull run has seized the attention of millions of people who previously had never considered digital currencies like Bitcoin to be an alternative asset. While gold and bitcoin are both sometimes used as a means to diversify and hold a range of valuable assets, in many ways they are quite different. Bitcoin and other digital currencies can be easily traded on platforms. We have seen progressive global firms offering to receive payment in bitcoin and advocates such as Tesla taking an active role in promoting it. This liquidity, ease of exchange, and wider use in the modern economy are some of the major differentiators. Gold has a relatively defensive purpose- to hold value, whereas Bitcoin and other currencies are intended to have several uses, not least ease of exchange, purchase, and liquidity.” – Pavel Matveev, CEO, Wirex.
“Based on the trajectory of this digital gold path and use cases globally, we believe bitcoin will be a mainstream asset class in the future. While gold has clear value and safety, the upside in bitcoin is eye-popping if it stays on its current course over the next decade.” – Daniel Ives Managing Director and Senior Equity Research Analyst at Wedbush Securities
“Gold is, no pun intended, the standard if you want to measure purchasing power over millennia. The liquidity of gold has been consistent over time. Gold is what defines the X-axis of purchasing power over time. Bitcoin, while it shares defensive qualities with gold, has the additional attribute of being aspirational. What bitcoin would seem to possess is the potential to go up to multiples of a moonshot. No one thinks gold will moonshot. Bitcoin is also finite, unlike gold. No increase in demand can change that. There is zero elasticity.” – JP Thierot, CEO of Uphold, a digital money platform
“I would probably pick bitcoin but why not both? Gold and bitcoin have a very similar aspect to the portfolio. I would add gold as a diversifier. I would add bitcoin as a diversifier. The hedge is diversification. Bitcoin is a tool to get there. Bitcoin is a hedge to losing money to something stable.” – Mike Venuto, co-portfolio manager of the Amplify Transformational Data Sharing ETF, a $1 billion ETF.
Last week saw some game-changing events for the cryptocurrency market, which pushed the prices of bitcoin, ether and others to record highs. Meanwhile, on the commodities front, a broad sweep higher in raw materials prices has got market-watchers pondering if we are on the verge of a new super-cycle. This coming week may reveal if big investors are buying into crypto, as well as the resilience of star precious metal, platinum.
Bitcoin to the moon… and beyond
Bitcoin hit a record of nearly $50,000 last week and this time around, it wasn’t a motley crew of amateur traders organizing an effort to squeeze the price higher. Elon Musk, a long-time advocate of cryptocurrencies and of bitcoin, in particular, had already ignited a frenzy in “meme crypto” Dogecoin.
But it was Tesla – the electric vehicle maker he founded and runs – unveiling a $1.5-billion purchase of bitcoin that fueled this latest leg higher. Tesla said it would also consider allowing customers to pay using the digital token, possibly opening the floodgates to other large companies to do the same.
Online payment groups like PayPal and Square already allow users to buy and sell with crypto. Last week, Mastercard joined their ranks and said it would allow the use of some cryptocurrencies on its network.
RBC suggested Apple could be the next big corporation to adopt bitcoin, and the CFO of Twitter told CNBC on Wednesday that it too could buy the token. But bitcoin isn’t ready to go mainstream, according to the world’s biggest asset manager, UBS. And Treasury Secretary Janet Yellen has, again, voiced reservations about cryptocurrencies in general, saying their use in online crime and for money laundering is growing.
BlackRock, the world’s biggest fund manager, last month said it would allow two of its funds to invest in bitcoin futures. So who’s next?
This week could bring the answer to that question, when Wall Street’s big guns report how they invested their money in the final three months of 2020.
“Hey big spender” – how the funds spent their funds
This coming week, the biggest US investors will release details of what they put money into -and sold off – in the fourth quarter of 2020. The so-called 13-F filings with the Securities and Exchange Commission offer a breakdown of the holdings at the end of December of any fund with more than $100 million under management.
However, in the wake of the GameStop short-squeeze in January, anyone hoping to get a look at what stocks the funds are betting against will be disappointed. A 13-F filing contains long positions only, along with a fund’s options holdings, convertible notes and American Depository Receipts (ADRs) – or holdings of US-listed stock of foreign companies. But no short positions.
Even so, most investors – professional and amateur – scour the 13-Fs to see what the “smart money” did last quarter. Warren Buffett, “Big Short” investor Michael Burry – who must be one of the lone Tesla shorts standing -, Ray Dalio, David Einhorn, Seth Klarman and Ryan Cohen will all release details of what they bought and sold.
The price of platinum rocketed by 15% to above $1,200 an ounce its highest in over six years last week, driven by a heady cocktail of a weaker dollar and a broad investor push into commodities and making it the best-performing raw material of the past week. It scorched past crude oil, copper and lumber and is on track to top the charts for the month of February.
Until around last March, in the depths of the coronavirus crisis, platinum had been on a long, painful downtrend. Aside from its use in jewellery, platinum’s main industrial use was in the catalytic converters of diesel-powered vehicles. The diesel-emissions scandal, which led to a drastic drop in sales of diesel vehicles and several punitive measures aimed to reduce the number of them on the roads, has eaten into platinum demand – so much so that for the past six years it has been worth less than gold, despite being far more scarce.
As the world transitions to using cleaner sources of energy and cutting emissions, several commodities are emerging as being central to this effort, platinum being one of them.
Platinum, together with iridium, is used as a catalyst in proton exchange membrane electrolysis – used to extract hydrogen from water as a source of zero-emissions sustainable fuel.
Johnson Matthey, the world’s largest refiner of platinum group metals, said in a report on February 10 the global platinum market ran a deficit for the second year in a row in 2020. It looks likely to see a shortfall again this year.
“The move towards an expected supply deficit is occurring at a time of increased focus on tightening emission regulation in regular combustion engines while accelerating green hydrogen production has increased demand for platinum-based electrolyser capacity,” Saxo Bank head of commodity strategy Ole Hansen said in a note last week.
“Having been in a downtrend for nearly a decade, platinum’s breakout last November helped attract renewed investment demand, not least after gold hit $2000/oz and its premium to platinum rose above $1000/oz. These developments helped attract increased switching activity between the two metals,” Hansen said.
Chart of the week – pot luck
Last week, cannabis stocks went parabolic, driven by double-digit percentage rallies in the likes of Aphria, Tilray and Sundial Growers. Joe Biden’s victory in the presidential election and Democrat promises to decriminalize cannabis have given a number of investors, including the Reddit traders, reason to pile in. Cannabis was the top-performing investment theme last week, according to broker CMC Markets’ Global Thematic ETF screening too, with a gain of nearly 40%, compared to runner-up uranium, with a 11% increase.
Reddit day traders are turning to silver for their next short-squeeze target after being restricted from hot stocks like GameStop and AMC on some trading platforms.
Reddit’s WallStreetBets has been the talk of the market over the past few weeks as the forum used retail traders’ purchasing power to put the squeeze on institutional investors and short-sellers.
Now it appears the day traders of Reddit have found their next target in precious metals.
“Silver Bullion Market is one of the most manipulated on earth. Any short squeeze in silver paper shorts would be EPIC,” a user on Reddit’s WallStreetBets posted. “We know billion banks are manipulating gold and silver to cover real inflation. Both the industrial case and monetary case, debt printing has never been more favorable for the No. 1 inflation hedge Silver.”
Another post on the site said, “inflation-adjusted Silver should be at 1000$ instead of 25$. Why not squeeze $SLV to real physical price. Think about the Gainz. If you don’t care about the gains, think about the banks like JP MORGAN you’d be destroying along the way.”
The iShares Silver Trust gained as much as 7.2% on Thursday morning after the posts, a significant move for an ETF that normally has low volatility.
Spot silver also gained 6.8% before paring gains, while individual names in the industry like First Majestic Silver were probably the biggest beneficiaries of the move.
Shares in First Majestic soared as much as 39% before paring gains. Still, First Majestic is up over 20% as of 2:35 PM EST.
“There’s a short squeeze going on in silver. The ‘hoodies’ are all rolling into silver, and the party is on,” Phil Streible, chief market strategist at Blue Line Futures, told Bloomberg. “All those other stocks like GameStop and AMC, they’re dumping because they’ve been restricted, and they gotta go into other short opportunities, and silver is an easily identifiable target.”
Silver prices have been muted for months after falling from highs of $28.30 an ounce last August.
The precious metal is generally not a volatile commodity, making Thursday’s spike in price notable. Spot silver has traded between $14 and $28 for the past five years.
Precious metal bulls are taking note of the price action. Peter Schiff, CEO of Euro Pacific Capital, said on Twitter, “It looks like the #reddit raiders have turned their attention to #silver stocks. They’re getting smarter. Silver stocks are actually cheap, and represent good investment value. The fact that some investors were foolish enough to short these stocks makes their trade even better.”