Gold and Silver Weather the Storm as Middle East Unrest Shakes Crypto Markets

 Gold and Silver Weather the Storm as Middle East Unrest Shakes Crypto Markets

Over the weekend, cryptocurrency assets saw a significant drop, with the crypto economy shedding more than 5% to fall to $2.3 trillion, while precious metals also saw declines, albeit less severe than the digital currency sector. Amidst the ongoing turmoil in the Middle East, gold fell by 1.18% in the last day; however, in contrast to bitcoin, it has appreciated against the U.S. dollar over the past week. Furthermore, recent survey data suggest that investors hold an optimistic view of gold for the coming week.

Gold Holds Steady Amid Geopolitical Tensions; Recent Survey Highlights Ongoing Bullish Sentiment

On Saturday, tensions escalated as Iran conducted a drone airstrike against Israel, wiping out over $330 billion from the value of the crypto market. Data indicate that BTC dropped 6.9% over the last week due to the weekend’s downturn. The downturn in the crypto market is largely linked to the Iran-Israel conflict, and U.S. equities are anticipated to experience some impact on Monday. Precious metals, however, experienced only minor losses in comparison to BTC and ETH.

Price of gold on Sunday, April 14, 2024

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Gold remains 0.6% higher for the week despite a 1.18% decrease in the last 24 hours. Silver has declined by more than 2% during the past day, yet weekly figures show that silver is still up by 1.36%. Over the past six months, both precious metals have climbed more than 21%, and despite bitcoin’s downturn, it still posted a 124% gain over the same period. This week’s Kitco News Weekly Gold Survey reveals that investors in Wall Street and Main Street’s precious metals remain bullish, noting that “geopolitical risks” may act as support rather than hinder gains.

The day before the attack, Frank McGhee from Alliance Financial addressed the escalating tensions between Iran and Israel with Kitco, remarking, “The best component that I can see now is that the market is finally paying attention to geopolitical, and as the threat of an Iranian attack on Israel looms, the market has finally just decided to take notice.” During the cryptocurrency downturn on Saturday, metrics further indicate that traders not only sought refuge in U.S. dollar stablecoins, but also gravitated toward gold tokens such as Tether’s XAUT and Paxos’s PAXG, which both experienced notable increases.

Specifically, PAXG soared to $2,855 per coin on Saturday, drawing considerable interest following the public announcement of the drone airstrike at 2 p.m. Eastern Time. While the substantial premium on PAXG has diminished, it maintains a $100 premium over the current gold spot prices. Meanwhile, the premium observed with XAUT was less pronounced, yet it still stands at $25 above the gold spot price as of Sunday afternoon.

What do you think about gold and silver weathering the storm amid the Middle East conflict between Iran and Israel? Share your thoughts and opinions about this subject in the comments section below.

 

'Gold and Bitcoin are both useless asset classes': Why average investors must avoid gold, cryptocurrencies

In physical sense, Bitcoin does not exist; it is entirely a technological construct

Synopsis

Gold and Bitcoin investments: This is a dangerous illusion. The volatility of these assets makes them unsuitable for the average investor seeking stability and growth over the long term. Though some have built fortunes on the rapid ascent of Bitcoin and gold, many more have suffered losses when their values plummeted without warning.

Bitcoin and gold are zooming, which is not new, because the things people trade in go up and down. These two asset classes don’t interest me, and from time to time, I marvel why people invest in these. Is the current bull run in the two more or less the same? The answer is, mostly, yes. However, I’ll point out something that is different

Gold and Bitcoin are both useless asset classes that produce nothing. In origin and nature, these couldn’t be more different. Gold is the simplest form of wealth to understand; if it’s physical gold, it’s worth something. It has been used as a store of wealth and currency for millennia. Bitcoin is quite the opposite. In physical sense, it does not exist; it is entirely a technological construct. Fifteen years after its invention, relatively few people understand what it is and why it’s worth anything. I don’t know how many people genuinely understand what a blockchain, token, or NFT is, or what a crypto transaction actually does.

Yet, in global finance, both are functionally the same. They are both functioning as currencies that are being used as havens from the rain of US dollars, which has now become a flood. Despite their fundamental differences, convergence in their function as safe havens reveals a broader narrative about diversifying assets in times of economic uncertainty. The deluge of US dollars can potentially safeguard their wealth against inflation and devaluation. At least, that’s the theory.

The US government is now adding nearly trillion dollars of debt every 100 days or so. What we see as price of gold or Bitcoin is better thought of as exchange rate between currencies. You can say that gold and Bitcoin are having a bull run vis-a-vis the dollar, or that the dollar is bearish vis-a-vis the other two. The supply of dollars is expanding so rapidly that plenty of people would rather hold gold and Bitcoin than the US currency. Moreover, it seems as if this will go on for a while. Since the economic growth in the US is fine and tax base is expanding normally, this appears to be the new normal.

Let’s leave aside the global economy and consider what concerns us. The sudden revival of Bitcoin and rise in gold is turning too many heads in the domestic saver and investor class. These asset classes are and, should be, the domain of punters. Sensible investors should not base their financial futures on these. However, the allure of quick gains has never been stronger. Compared to these, traditional investment returns look modest, even if they are not. The buzz around Bitcoin and gold taps into the collective desire for a financial safe haven that occasionally delivers gains similar to that from a lottery. It’s a place to park wealth that is theoretically less vulnerable to the whims of governments, with the added bonanza of good returns.

Yet, this is a dangerous illusion. The volatility of these assets makes them unsuitable for the average investor seeking stability and growth over the long term. Though some have built fortunes on the rapid ascent of Bitcoin and gold, many more have suffered losses when their values plummeted without warning. This is a casino, and the odds are rarely in your favour. So, while it’s tempting to join the fray, driven by tales of overnight riches, the prudent course is to approach with caution. Diversification, research, and focusing on assets with intrinsic value that generate income over time, remain the cornerstones of a sound investment strategy.

Our primary attention must be directed towards domestic investments, with an eye on the broader international context. Living in isolation is seldom an option, particularly in the current climate. The Indian economy and markets are doing great, and that’s where the investors must focus.