Gold Catching A Bid In 2018 As Cryptos Tumble

sector rotation from bitcoin into gold

Some have speculated that as Bitcoin holders inevitably lock in profits they will eventually move funds into precious metals. If that sector rotation indeed happens, 2018 could be a very good year for gold.

Today was one of carnage for Bitcoin, as it dropped almost 20%. It went as low as $10,063 intraday.

From Neils Christensen at Kitco News:

…Bitcoin is down 42% from its record highs of above $19,000 seen just one month ago.

By comparison, the gold market is one of the best performing assets at the start of the new year, holding near a four-month high. February gold futures settled Tuesday’s session at $1,337.10 an ounce, up 8% since its lows seen last month.

Maxwell Gold, director of investment strategy at ETF Securities, said in a recent research note that he continues to prefer gold over cryptocurrencies. He noted that bitcoin’s volatility is one of the key reasons why it will won’t usurps gold’s role as a safe-haven asset and long-term store of value.

“Since 2010, bitcoin’s annualized daily volatility has been 15 times more volatile than the US dollar, 7 times more volatile than the price of gold, and 3 times more volatile than the price of oil, one of the most volatile commodities,” he said.

Gold added that he also prefers the precious metal over bitcoin because the latter has been driven by risky speculative behavior. He noted that bitcoin’s gains have been driven by sentiment, which in the long-run is proving to be unsustainable.

While sentiment is also a critical component in the gold market, he pointed out that the market is still more diverse than that of digital currencies.

“Assume the world decided overnight that gold has no intrinsic monetary value. The next day there would still exist a demand for the physical metal for adornment as well as industrial and scientific endeavors. This would not be the case, however, for bitcoin whose only utility stems from the acceptance and use in transactions – a role still unachieved as of today,” he said in the report.

 

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