Wednesday, 1st July 2020
Why I’m finally about to make a bet on Bitcoin….
Gold is on a tear right now….
It’s no surprise. I told you to expect rising gold prices back at the start of April….
The yellow metal is up 12% over the last 3-months….
Current spot prices haven’t been seen since 2012 and we’re 70% ahead of prices at the bottom of the last bear market in 2015….
Right now, gold is testing the psychological price barrier of $1,800 per ounce….
Should it break through that ceiling, gold holders will sail into previously uncharted territory….
- Laughing at the cautious….
Gold is the traditional safe-haven investment during times of financial turbulence, turmoil, and trouble….
Plenty of capital is seeking out that shelter. But not everybody gets it….
Ardent stock traders – ever confident of perennially rising markets – laugh at this caution….
The FTSE has just posted its best quarter since 2010, they scoff….
European stocks – driven primarily by Germany – haven’t had as good a quarter since way back in 2015….
Over in the US, the Nasdaq has been hitting new highs. The S&P 500 just enjoyed its best quarter since 1998 and its best Q2 results since 1938….
Okay, they argue, it’s been a rough and tumble kind of year. Not all losses have yet been recouped….
But recent action shows just how resilient the stock market is. Nothing can truly floor it. Nothing can keep it down. The stock market always bounces right back up again – stronger than before….
Stock traders (old soldiers and fresh millennial meat) – confident that buying the dip is the strategy that can’t be beat – can’t understand why anybody would sit out this party with their money stuck in stuffy old gold….
- Misplaced market confidence….
I don’t know whether to admire the stomach of buy the dip addicts or to marvel at their recklessness….
Rising stock prices point to confidence. And confidence – in its place – is no bad thing….
But the problem with confidence is that it is easily misplaced. And, right now, confidence in stock prices is misplaced. That’s my view….
Nobody knows what is going to happen with COVID-19. How would a second wave of global infections play out? The second wave of Spanish flu was bigger and more damaging than the first….
The economic impacts – those that we are already aware of – require no reiteration. What is yet to come could dwarf what has already been….
Only last week, Bank of England Chief, Andrew Bailey reported that the government would have been unable to continue functioning without continued central bank stimulus….
And that core financial markets came close to complete meltdown back in March….
How long will central banks need to underwrite and underpin the functions of government? Who knows? But it is worth noting that sustained central bank money printing is always a bullish signal for gold prices….
- I’m with the Chinese, the Russians and the super-rich….
I’m frequently accused of having a negative outlook on stocks. But I am neutral. I report what I see. No more. No less….
Up or down, I’m not emotionally involved. I merely say what I think – good, bad, or ugly….
And I am not alone in wondering if stocks should be flying so very high with myriad businesses going to the wall, millions of jobs lost or under threat, heavily reduced consumer spending and governments more indebted and with fewer options to fight back than at any point in human history….
Only last week, the IMF pointed out that the recent stock market rallies might have run on too far and might prove vulnerable to correction….
And this is a global issue – not one exclusive to Britain….
So, there’s been plenty of international demand for gold – led by the canny Chinese government (they’ve been steadily buying for a while), the strategic Russian government (ditto) and large swathes of the super-rich who know a thing or two about where best to protect what you’ve got against trouble that’s brewing down the road….
Hence the rising gold price….
- Hard money….
The great thing about gold for safety-seeking capital is that because the metal is scarce and hard to produce, it holds its value long-term….
The value of gold cannot be steadily eroded or easily diluted by any massive increase in supply….
Whereas the unit value of almost every domestic currency will be diluted in the years ahead thanks to unprecedented central bank inflation of the money supply – via money-printing, bond-buying, loans made funded by thin air, and all the rest of it – there is only so much gold….
You can’t print or manufacture gold. And that which can be added to the supply is not easily added….
As the pound, the euro and the dollar decrease in value going forward, gold will not only hold its value – but increase in value….
Gold is hard money – its scarcity is a feature that enables it to store value in times of trouble and across the long-term. It’s done the job effectively for 5000 years….
Anybody sitting on a pile of cash right now, would be well advised to buy gold. The price will fluctuate – moving up and down. It won’t be plain sailing. It never is….
But long-term, my view is that gold will increase in value to previously unseen levels….
The world faces a financial crisis that makes the last one look about as threatening as a church picnic….
I reckon there’s going to be massive international and institutional capital flight into gold. We’re only just at the beginning of that trend right now….
Demand is set to get much bigger. And with supply limited, that can mean one thing only in terms of price. Gold is going up across the long-term….
- I’d also be buying Bitcoin….
But I’m not stopping there….
Gold is hard money. But it is not the hardest money of all….
That distinction falls to Bitcoin – and I think now is the right time to speculate on the digital cryptocurrency….
I’m not betting the house – just enough to have an interest without any downside jeopardy. I want a small stake in Bitcoin’s future – for the exact same reason I believe gold is currently a good bet….
Bitcoin is hard money. The hardest money of all. Harder than gold. Harder than silver. And harder than any of the hundreds and thousands of cryptocurrencies that have sprung up over the last few years….
You see, the one thing a lot of people don’t realize about Bitcoin is that supply of the cryptocurrency is set in stone….
There will only ever be 21 million Bitcoins. Over 18.4 million of those are already in circulation. The remainder of the supply will be created at a steadily decreasing rate over the next century….
There’s nothing anybody can do to accelerate the supply or to change it. No central bank, no central government, no corporation, no individual, no vested interest and no cabal of criminal masterminds can do anything to increase Bitcoin supply….
The supply is hard coded into the blockchain algorithm that underpins Bitcoin….
Supply of Bitcoin is strictly limited. In a way that no other form of money is. Gold is hard – but new supplies can be mined. Bitcoin is harder still – harder than anything. There can be no new supply….
No other currency boasts the same feature. Certainly not domestic fiat currencies. And certainly not alternative cryptocurrencies – which can all be manipulated, managed, and modified one way or another by some vested interest or central player….
Like gold, Bitcoin is well set and perfectly structured to be a reliable future store of value….
Supply is limited and as demand increases for safe havens and assets that protect values in the years ahead, I am prepared to bet that the price of Bitcoin will rise – significantly….
- Other factors….
Bitcoin’s hard money credentials – in a universe of diminishing options – appeal to me….
But there are additional factors influencing my decision to bet Bitcoin at this time….
More on those next time….
That’s how it looks from here….
All the best,