Gold price has been supercharged in the past few months, helped by the surging demand by central banks and other institutional investors. The precious metal soared to a high of $2,430, much higher than last year’s low of $1,805. It has jumped by over 62% from its lowest point in 2022 and is in the five consecutive week in the green.
Global risks and dollar hegemony
It is worth noting that the performance of gold has diverged from other financial assets. As it rose, other financial assets have pulled back sharply in the past few weeks.
For example, Nvidia has moved into a bear market while the Super Micro Computer (SMCI) stock is down by over 26% from its highest point this year. The Dow Jones, Nasdaq 100, and S&P 500 indices have all pulled back in the past few weeks.
Most importantly, gold price has surged as US Treasuries have crashed hard. The 10-year Treasury yield rose to 4.57% while the 30-year jumped to 4.62%. Bond yields move in the opposite direction from the price of an underlying asset.
Gold price has surged as more central banks have continued their purchases. The People’s Bank of China (PBoC) has accumulated tons of gold in the past 36 months. It has done that while continuously reducing its holdings of US government bonds.
Other central banks are also buying gold aggressively. Some of the most notable purchases are from countries like Turkey, Iran, Russia, Kazakhstan, and Uzbekistan. These banks have continued buying gold as they continue shifting away from the US dollar as Washington continues using it as a weapon.
Further, there are signs that Chinese investors have continued buying gold as the domestic market has weakened. Recent data shows that the Hang Seng, Shanghai, and China A50 indices have all plunged hard in the past few months.
Therefore, there is a likelihood that the price of gold will continue doing well in the coming months. Goldman Sachs believes that the price of gold will jump to $2,700 while UBS has boosted its outlook. In a note, the analysts noted that:
“We lift all our forecasts by USD 250/oz, expecting gold to trade at USD 2,300/oz in June and at USD 2,500/oz at end-2024 and end-March 2025. Renewed price setbacks in the short term remain possible if US economic data delays Fed rate cuts, but so far these setbacks have been shallower than we had expected.”
Is it safe to buy Bitcoin now?
Therefore, with the price of gold surging, is it safe to buy Bitcoin? Historically, Bitcoin has often done better than gold.
As I have written before, Bitcoin has better fundamentals than gold in a few ways. First, Bitcoin has a limited number supply. Its supply is capped at 21 million and over 16.5 million coins have been mined already.
Millions of these coins have been lost permanently and the supply of Bitcoins in exchanges has continued falling, as shown below. Further, the supply of Bitcoins will continue falling as the halving event happens this month.
At the same time, Bitcoin demand is still rising, albeit slowly as evidenced by the performance of ETFs accelerated. Bitcoin ETFs now have over $60 billion in assets and the trend may continue rising in the long term.
In the short term, however, there are signs that Bitcoin will go through some volatility as it formed a triple-top pattern.
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