Bitcoin, Gold Soar Amidst Global Economic Woes

Bitcoin, Gold Soar Amidst Global Economic Woes

Bitcoin recorded a leap above $10,000 for the first time since June 3 when bitcoin halving spurred a surge. It has however maintained stable decline until mid-July when the crypto coin started to witness an increase once again, rising to about 11%.

According to data from Coindesk, the digital currency traded at $10,196.27 at around 12:31 p.m. Singapore time, gaining 2.55% more than the previous day.

Head of business development at Luno, a cryptocurrency exchange, Vijay Ayyar told CNBC that there was a debate by big players on whether to sell off their bitcoin to the market newbies to push the price lower and make the coin more attractive for bigger investors looking for digital assets.

“This doesn’t seem to have happened. What we have unfolding is potentially re-accumulation by big players, joined by smaller traders in an attempt to push BTC higher past 10k and more past 10.5k, which is the big resistance level, where BTC last put in a high.

“We still haven’t broken the 10.5k level, if that happens; BTC is probably running to 15k. All signs point to that at this point,” he said.

Bitcoin is expected to add more gain as governments announce economic stimulus packages to tame the tides of coronavirus pandemic. Moreover, the development of potential vaccines for the virus is offering further hope that bitcoin could attract more investors who are keenly watching the development.

Ayyar added that like other commodities, bitcoin could benefit from the stimulus packages as well as the vaccine development.

“My view is that with the major governments declaring unprecedented stimulus packages… we will see continued bullish momentum across markets. So that includes equities and gold as well. And BTC and crypto will follow in this regard. Added to the fact that a vaccine seems within reach as well now, no reason to be bearish near term,” he said.

Meanwhile, gold has kept defying the pandemic and the US-China tension to record gains in different markets. In Monday morning hours trading of Asian market, spot gold traded at about $1,931,11 per ounce after its earlier $1,943,9275 trade per ounce. This market record surpassed the previous September 2011 high price. Gold futures also went up 2% to $1,938.70.

UBS chief investment officer, Mark Haefele told clients on Monday that the driving force of the surge is the negative correlation to real interest rates and the dollar.

“While we think gold will continue to be supported by rising geopolitical tensions, in our view the primary drivers of the gold are its negative correlation to real interest rates and the dollar. We think these three factors, in combination with limited supply growth as miners continue to restrain capital spending, will drive gold price higher,” he said.

CNBC reported that the yield on the benchmark 10-year Treasury note last sat at 0.5856%. The US dollar was at 93.906, while the Japanese yen traded at 105.60 against the greenback after strengthening sharply late last week from levels above 106.40 per dollar.

Vivek Dhar of the Commonwealth Bank of Australia, who is a mining and energy commodities analyst at the firm said even though there have been other driving factors to the yields, the fall in US 10-year real yields has been the “most important driver,” including weakened US dollar and safe-haven demand being lifted.

“The negative relationship between long term US real yields and gold futures has held up fairly well over the longer term. That is because when long term US yields increase, gold is less attractive relative to US interest bearing securities since gold has no income earning ability. The fall in US 10 year real yields is primarily being driven by an increase in US 10 year inflation expectations,” he said.

The geo-political conflict between the US and China is expected to contribute to further growth, but investors are warily waiting for a clear sign as they continue to look for a safe haven to hide their wealth from the economic storm.

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