Spot gold prices have hit a three-year high. Bitcoin is on the rise, too. Some are even taking it a step further to project gold at $2,300 per ounce and Bitcoin at a staggering $100,000. Why the fuss about these two assets?
On 1 December, the gold prices exceeded the August 2020 figures of $2,075 to reach an all-time high of $2,151.2 per ounce. Earlier this year, the gold prices were inching close to this mark on several occasions. Eventually, three-plus years after it hit the previous high, the current record was set.
Meanwhile, another asset that has been skyrocketing recently is Bitcoin. One can say it is competing with gold as the investment it is drawing is, too, meant to provide security from the shocks of conventional market segments. Bitcoin has posted 140+% growth this year. And analysts are positive about the future figures for both gold and Bitcoin.
The demand for both assets typically soars against flare-ups in international conflicts and overall uncertainty. Gold has finally hit an all-time high on the back of the Israel–Hamas truce collapsing and Houthis attacking commercial ships in the Red Sea. The demand for gold has now been consistently high for a number of years thanks to the rising interest rates both in the US and globally.
‘Central banks worldwide have been propping up the spot gold prices over the course of the year. According to World Gold Council, as of Q3 2023, the demand for gold coming from the central banks has jumped 14% compared to the start of Q1 to reach a record-high 800 tons,’ says Alexei Kalachev, an analyst with Finam.
‘One of the key factors driving the gold prices has been the turbulent dollar fluctuations. The US economy narrowly escaped the default and the ensuing recession. Now, the yield on the 10-year US Treasury bonds is about to drop.
‘As the dollar clearly finds itself in choppy waters, the central banks of large countries are ramping up their foreign exchange reserves. This explains the consistent growth in gold prices, culminating in a 15% surge this year,’ comments Boris Usherovich, an independent financial expert.
A turbulent global economy as well as the escalation of conflicts in the Middle East are also catapulting the growth of Bitcoin. ‘Up until recently, the Bitcoin prices were hovering around $26,000. However, once the all-time low volatility and the decline in trading were no longer a factor, the cryptocurrency market has been booming. Currently, Bitcoin is worth $41,200,’ Boris Usherovich adds.
Although gold and Bitcoin are enjoying a simultaneous growth spurt, these are two starkly different assets. ‘Cryptocurrency trades as a speculative asset, meaning it helps you protect your investment. Gold, by contrast, is one of the world’s most conservative assets,’ Usherovich explains.
The buyer profiles are different, too.
‘Precious metals are typically purchased by governments as the central banks of large countries are stepping up their foreign exchange reserves to lower the volatility of their national currencies and sustain their economies. On the other hand, the cryptocurrency market is the realm of private investors.
‘They are keeping a close eye on the big players’ moves and swiftly respond to them,’ says Usherovich.
‘If gold stabilises at $2,080+ per ounce anytime soon, further growth is very likely. We are expecting it to reach a significant resistance level at around $2,200 to $2,210 per ounce. Going into 2024, the prices may further rise to $2,100–$2,300,’ says Dmitry Puchkarev, a stock market expert at BCS World of Investments.
‘If gold prices keep trading at over $2,050 per ounce, the delayed-response impulse from investors may then push them even higher, with a ballpark estimate of $2,200 per ounce, before they are able to reconsolidate,’ Alexei Kalachev predicts.
As for Bitcoin, Western executives at the cryptocurrency market are certain that the renewed bull run has already started. By the end of 2024, Bitcoin is likely to hit a new all-time high at over $100,000, according to CNBC. This prediction was offered by the Standard Chartered bank last week. Matrixport, a provider of cryptofinancial services, projects Bitcoin to reach $63,140 by April 2024 and $125,000 by the end of 2024.
‘The analysts have already been proven right as H1 2023 saw Bitcoin jump to around $30,000. And it will continue growing ahead of the spring halving in 2024. Other cryptocurrencies will follow suit. Therefore, I am expecting both crypto and gold prices to keep surging. The current unique circumstances may well see the wildest predictions become a reality,’ says Boris Usherovich.
The Bitcoin halving, where the release rate is cut in two once every four years, is slated to take place in May 2024. The halved release rate also means halved rewards for the miners. This is done to rein in the crypto inflation rate.
Bitcoin last reached an all-time high at almost $69,000 in November 2021. Ever since, the crypto industry has been rocked by a series of issues from crashes and failed projects to firms going bankrupt and getting charged. For example, after FTX, one of the world’s leading exchanges, collapsed, its founder, Sam Bankman-Fried, is facing 100+ years of jail time as he was charged with securities fraud and found guilty of seven criminal counts.
Meanwhile, Changpeng Zhao, former CEO of Binance, pleaded guilty to violating anti-money-laundering laws and stepped down from his executive role as part of the plea deal he had struck with the US Department of Justice. He was to pay a $4.3 bn fine. Some think these two cases will lead to the stabilisation of the cryptomarket.