The outlook for gold and silver bullion prices has turned back to Strong earlier last fall. Several significant factors — now accelerated by this latest crisis and the economic strains of the worldwide over-reaction to it — are increasingly working in favor of precious metals as an investment into 2020 and beyond.
The great sell-off that had been triggered in late-summer of 2011 by ETFs pulling out of and liquidating huge gold and silver positions, has long been absorbed and fully digested by the markets. Prices used to sit in a narrow band for an extended period of time after that sell-off, making price declines in precious metals appear over-exaggerated for a significant period of time spanning from 2011 to at least 2017 . Still, on closer scrutiny, both precious metals actually kept much of their value, with gold performing not too bad in particular even during that period.
Demand for Non-Fiat Investments
Inthe intermediate term, and with the up and coming Crypto currencies becoming increasingly popular after 2011–3, some investment money looking for alternatives to fiat or paper investments had gone into Bitcoin, Litecoin, and other of the so-called virtual “currencies” or, rather, Crypto coins or tokens.
In light of the above, we’re obviously talking about physical precious metals bullion coins and bars here, not papered-over derivatives of them like any ETFs or investment funds. While trying to play in on the demand for gold or silver, they only are tracking gold and silver prices (which may or may not be profitable, but has got nothing to do with why these prices may rise in the first place). So what this article is about is bullion-in-hand or real physical gold or silver bullion products.
Gold Now Made a Tier-1 Asset under Basel-III Rules
With a number of both fundamental and technical events more recently, this trend in favor of Crypto has seemed to be reversing for a few months prior to fall 2019. The most prominent one among these is the move of Gold Bullion in Basel III banking regulations to a tier-1 asset, up from tier-2. This means that gold held by commercial banks as a capital reserve is now an asset which is marked to market with a 100% instead of the earlier 50% of its market value when it was classed as a tier-2 asset.
By this move, one of the last major disadvantages for banks to holding gold has been lifted. Being able to account their gold holdings with 100% value increases banks’ balance sheets and, therefore, their ability to issue more loans and profit from resulting interest earnings.
Other significant factors include technical hurdles in Crypto prices which will take some more time to clear. Crypto prices — most significantly shown in the Bitcoin (core) market itself — are now forming an NSW (narrow sideways-channel, or something of a plateau) from a technical point of view. This makes it increasingly hard for Crypto prices to break out and continue upwards. Such a move is, therefore, likely not happening before the end of 2019 or early 2020.
Precious Metals Prices Have Clearly Bottomed Out
So far, the result of all of the above has been a bottoming-out in precious metals prices, followed by a significant turnaround, in the wake of this summer’s Basel III re-classification of commercial bank gold holdings. Adding to the mix are the liquidity shortages in the New York interbank or Repo market in the Fall of 2019 that was not possible to fully be swept under the carpet. As a result, the gold price received its trigger to break out of its own narrow-sideways-channel between $1300 and $1430 and began testing the $1500 barrier later last Fall. While $1500 seems to be a significant hurdle and may take some time for gold prices to tackle, once cleared the upward move in gold is likely to accelerate. Silver should then follow suit.
We had to wait some time to see whether or not Crypto tokens would be able to shrug this off easily. While this seems to actually have drained yet more capital out of the Cryptos as an asset class and dragged Crpyto market prices down further for nearly a year, the answer is now in with Bitcoin’s and other Cryptos’ renewed upward moves and new all-time highs in Bitcoin itself. Precioius Metals prices have held steady during the same period of time though, suggesting that overall demand for non-fiat investments is rising in general and that there is actually sufficient demand to lift both asset classes. These rises may come simultaneously or in waves going back and forth between precious metals on one hand and Cryptos on the other, but they are likely here to stay longer term.
Extended article revised and updated December 28, 2020, original draft was written December 12, 2019
After breaking record high after record high during the same time last year, the ensuing decline and overall price breakdown of Bitcoin and Alt coins across the board have quickly made Crypto almost everyone’s least-favored investment.
Rightly so, if what matters for the great majority of Bitcoin enthusiasts is only price against US dollars or other paper currencies.
At the risk of sounding boring or repetitive, it needs to be stretched though that — more than opportunity for high-volatility trading and asset price appreciation — Bitcoin’s most important feature is the introduction of distributed ledger technology (DLT) and its potential for decentralized application technologies and the development of innovative and even more cost-effective solutions than conventional internet technology brought about.
Right now, Crypto token prices may be consolidating and show a few sign of developing a bottom formation — but one that is far from confirmed yet, so nobody should read this or any similar comment as an invitation to jump in and repeat their get-rich-quick dreams fostered last year.
Prices this week have shown an upward move above mid-Novembers meltdown that had been brought about by Bitcoin Cash’s hard fork and resulting market instability. If (and only if) prices further stabilize and continue building a classic 1-2-3 bottom formation, then a further increase out of the doldrums could be in the books for early-2019. This would likely see a Bitcoin price recovery (that might be relatively short-lived though), followed by a Bitcoin-induced Alt coins recovery which should be more significant than Bitcoin’s own. There are two reasons for this assumption, (1) the disproportionally larger decline of most Alt coins and (2) the fact that Bitcoin remains clumsy, slow and energy-wasteful which makes Bitcoin a great experiment and a welcome first-mover but also one of the Crypto coins with the least utility. Faster and greatly improved upon Bitcoin’s algorithm, there is a wide range of coins with streamlined and easier-to-use features, faster confirmations, and equally good reputations and development teams, as a result set to recover much more significantly than Bitcoin itself — which nevertheless should be leading the way, if or when a price recovery really is sustained and starts setting in.
Crypto coins are a beast of its own. Attempts have been made to classify Bitcoin and other peer-to-peer decentralized Crypto coins into one asset class or the other. Some analysts (and alongside them, a number of online trading platforms) believe Crypto coins should be seen as part of the Forex market. Others would like to see Bitcoin and Alt coins as a tangible asset and part of the precious metals market. Neither of these attempts are convincing though. The truth is that, while having some similarities with others, Crypto coins are an asset class of their own.
With other coins beyond the original Bitcoin establishing themselves firmly in the overall market and gaining increasingly significant market share, the argument for seeing Crypto coins as an entire “asset class” becomes more convincing by the week. Besides Bitcoin itself, circulating since early 2009, other peer-to-peer Crypto coins have appeared. The first to follow was Litecoin (ticker: LTC) launched in 2010 and improving on a number of Bitcoins experimental features; most importantly faster confirmation (total transaction) time, a better block size capable of processing a sufficiently high number of transactions, lower energy consumption, and a dedicated and publicly known development team and lead developer. Similar things can also be said about DASH, the innovative and privacy-conscious digital cash (ticker: DASH), Z-Cash (ticker: ZEC), Ethereum (ticker: ETH), Monero (XMR), or Ethereum Classic (ticker: ETC) — all of which have gained significant market share and range from around $300m to $4bn in market capitalization. This is additional to Bitcoin itself (ticker: BTC) which has a market capitalization of over $19bn at the time of writing.
While these market capitalization figures vary widely for specific coins in the top-15 of today’s peer-to-peer decentralized Crypto coins (or simply that new “Bitcoin world”), the most significant aspect is that the overall capitalization of those top-15 Crypto coins is a combined $27.5 billion, and counting. (This figure of the top-15 Crypto coins is up from roughly $7.8bn year-on-year.)
Ripple as a rather proprietary and not truly decentralized token with its $1.2bn market value is not even included in this figure because, unlike the other Alt coins above, Ripple does not really count as a “Bitcoin flavor”. (It remains to be seen if Vitalik Buterin’s policies for Ethereum will lead ETH in a similar direction and exclusion from “real” Crypto coins.)
With Bitcoin (BTC) having increased in price for most of the current year and currently trading above $1250, price gains of all the other coins are even more impressive as they clearly do not come from movements between Bitcoin and other Crypto coins but rather from an influx of new money into the Crypto coin asset class.
This includes current demand from investors following more conventional investment styles and accompanying newsletters. It appears to be time for them to jump on the Crypto coin bandwagon in order to profit from possible price gains as this overall asset class evolves and matures. The resulting increase in demand for at least the ten or twenty top-tier Crypto coins has resulted in significant price gains against all fiat currencies like dollars, pounds or euros over the last weeks and months.
Litecoin (LTC), Ethereum (ETH), and DASH (DASH) have seen the highest price increases while proving to be most stable and not as extremely volatile as some other smaller-cap Crypto coins.
Additional fundamental factors for these coins are adding to market expectations of further price increases as these coins are set to fill an increasing number of market niches opening for coins with special features going beyond Bitcoin’s original abilities and uses.
Peercoin had reached and exceeded the BTC .00150000 level briefly in January on Cryptsy before the troubled exchange’s breakdown, but that notation (topping at 159’0000 satoshis) had to be taken with a grain of caution. So whether or not the BTC .00150000 mark is of any technical significance may be uncliear in light of the nature of Cryptsy and the goings on around that outfit.
If today’s BTC .00150000 price at The Rock is exceeded, this would mark a possible breakout of Peercoin to the upside, a development that has gradually been preparing and building for Peercoin over the last few months.
The price of Bitcoin in US dollars is currently trading around a significant level. Bitcoin price history shows the rough $420 to $440 area to be a repeated level of support. Conversely, this level is now a rather strong line of resistance on Bitcoin’s renewed way up.
With a large flat-top triangle currently forming at this level, Bitcoin prices are preparing to rise more significantly. We may expect larger movements to the upside, once this level is cleared.
The price of Bitcoin to the US dollar and other paper currencies has been taking a breather during the last days, apparently in the wake of a technical short-term move to the upside in major stock markets.
Bitcoin and other Crypto coin prices powered ahead strongly during the first week of trading amidst uncertainties over stock prices and the worst start on record into a trading year for stocks. Particularly with stock investors in China fleeing the conventional markets and open to unconventional ones, Bitcoin and other Crypto coins were up quite significantly. Notably, this includes other Crypto coins than just Bitcoin and Litecoin like Peercoin, Dogecoin, and Earthcoin. The latter appears to grow into some kind of a darling among the Chinese and, as a result, has been moving quite in line with local developments there for the previous months and throughout several Asian stock market setbacks.
Bitcoin climbed back almost to its highs of late December 2015, but failed to jump over the current high around $463. Currently, the Bitcoin price appears to be waiting for fresh inputs from conventional markets and their fundamentals — mainly the likely negative ones that would propel the Crypto sector further into higher territory.
On this background, the remainder of the month may see some exciting developments for both conventional stock and foreign exchange markets and “alternative” investments as well.
The price of Bitcoin in US dollars has been picking up significantly again. The market price of the “original Crypto currency” has been hovering for months but was stable around $200, always clear of support around $180.
During the last weeks, bitcoins have been solidly advancing from $280 to more than $328 over the weekend. Weekends seem to be some kind of “high season” for amateur Crypto traders who appear to spend their free time glued to their screens and giving many Crypto currencies — beyond just Bitcoin itself — significant movements during these times.
Not that it mattered much for the overall idea of Crypto currency — but the price of Bitcoin is picking up very nicely again (and this time also quite solidly, without that infamous “volatility” the mass-media seems to “know” about BTC). With extra weekend-activity gone now, the latest reading for Bitcoin at Coinbase is still above $320.