Comparing Bitcoin To Gold

Strengths

• The best performing precious metal for the week was palladium with a 3.42 percent gain. Citi forecasts a continued drop in diesel market share in Europe, while Russia’s largest palladium producer boasted of strong auto demand. Gold traders and analysts surveyed by Bloomberg are bullish for a ninth week, the longest run since March. Gold climbed higher this week after the dollar weakened following Federal Reserve minutes that showed lingering concerns over low inflation, reports Bloomberg. Worries over U.S. economic policy also pushed the yellow metal higher, after the nation’s top CEOs’ rupture with President Trump.

• Investors put $870 million into SPDR Gold in the second quarter, reports Bloomberg, bringing the fund’s assets to $34 billion. “Prospective risks are now rising and do not appear appropriately priced in,” Bridgewater’s Ray Dalio said in a LinkedIn post. Dalio recommends that investors allocate 5 to 10 percent of their assets in gold, the article continues.

• Bond funds added $3.5 billion in a twenty-second week of inflows in the last week, reports Bloomberg, while precious metal portfolios attracted $500 million of new money. On the flipside, equity funds posted their biggest outflow in 10 weeks. One potential market moving event next week will be the Fed’s summit on August 24-26 in Jackson Hole.

Weaknesses

• Platinum was the worst performing precious metal for the week, down 0.67 percent, as the positive views on palladium are negative for platinum.  Last year Sibanye Gold Ltd., South Africa’s biggest gold producer, was bringing in money, sizing up acquisitions and plotting expansion projects. Today, however, the company is making losses and shutting mines, reports Bloomberg. The main difference between now and then is the rebound in the rand, which has strengthened about 23 percent since it changed direction in January 2016. Although a weaker local currency opens up more profitable gold to be mined, a stronger rand also means higher costs, the article continues. In some cases, this renders entire mines unprofitable.

• This week, tensions between the U.S. and North Korea moved from center stage, decreasing demand for safe-haven assets, reports Bloomberg. In addition, the Fed’s William Dudley signaled that he still favors another interest rate rise this year.

• Gold prices in India were at their widest discount to international prices in 11 months on Friday, reports the Times of India. The discounts are due to sluggish demand and an influx of the yellow metal sourced from South Korea. “South Korean supplies are distorting the market,” said N. Vijay, a bullion dealer from Salem in southern India. “Retail demand is still weak due to the price rise.”

Opportunities

• According to the head of precious metals at VTB Capital, a Russian investment bank, gold prices are set to jump to a four-year high of $1,400 an ounce by the end of the year, reports Bloomberg. Fueled by global political risks and buying from China and India, Evgeny Ananiev of VTB believes bullion could rise to $1,360 within three months before climbing even higher.

• India’s top maker of branded jewelry by market value, Titan Co. Ltd., expects sales from its Tanishq stores to rise 30 percent this fiscal year, reports Bloomberg. India’s tax overhaul is helping to attract more customers as the company expands its network. Titan saw shares rise to a record even as bullion prices fell. Sandeep Kulhalli, senior vice president for retail and marketing at the jewelry arm of Tata Group, noted that customers who once shied away from Titan due to higher prices (and who favored the flexibility of smaller jewelers), have changed their minds. Now, customers are shifting to branded stores because of their trustworthiness.

• The blockchain revolution is gunning for the gold market, reports Bloomberg. Many companies are seeing blockchain systems as a revolutionary way to verify and record transactions, and are rolling out platforms to bring gold into the digital age, the article continues. Over-the-counter settlements with gold can sometimes take days, leaving price risk for buyers and sellers. “Using blockchain promises more transparency, security and speedier deals,” Bloomberg notes.

Threats

• Tim Price of Morgan Stanley notes in a research report this week that bitcoin’s value has lifted about five times since a period of relative stability pre- November 2016, to over $4,000 per bitcoin. As a commodity analyst, however, Price also notes that bitcoin is just another fiat money, not a commodity – so why flag it then? He says that beyond its ongoing price surge, some investors think bitcoin is better than gold as a hedge against inflation/uncertainty. He thinks that theory still needs to be tested though. A bearish risk for bitcoin’s price is few barriers to entry. “Over millennia, gold has demonstrated its ability to endure and preserve value under all circumstances. By contrast, bitcoin’s global platform literally requires the lights to stay on,” the report reads.

• Senate Republican Bob Corker told reports in his home state of Tennessee this week that President Trump needs to show more stability. “I think the president needs to take stock of the role that he plays in our nation and move beyond himself – move way beyond himself – and move to a place where daily he’s waking up thinking about what is best for the nation.” Corker’s words are some of the strongest Republican backlash to Trump’s suggestions that both sides bear blame in the Charlottesville incident, reports Bloomberg.

• President Trump announced that he is disbanding two advisory groups of American business leaders, reports Bloomberg, after two additional CEOs quit as the president faced blowback for failing to sufficiently condemn white supremacists. His remarks were a reversal of what he had said just one day before. Trump previously tweeted that he had plenty of CEOs who wanted to be on the panels to replace those who quit, and called the CEOs who left “grandstanders,” the article notes.

http://usfunds.com/

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