One ounce of gold (31.1 grams) was worth more than 2,000 dollars again on Friday. Bitcoin, the world’s most valuable cryptocurrency, even saw a spectacular increase in price of 14 percent last week and is now trading above $34,000. What’s behind the sentiment that’s driving the value of both investments higher? We asked Jan Van Cutsem, precious metals trader at The House, and Thomas Spaas, lawyer who provides tax advice to crypto investors.
The precious metal gold is once again a coveted commodity. The main reason for the 9 percent increase in prices – the gold price briefly rose above 61,000 euros per kilogram on Monday – is the war between Israel and Hamas. The fear that the conflict in the Middle East will intensify into a regional war is causing many investors to invest in ‘safe havens’, such as gold.
The rallies of gold and also bitcoin are in stark contrast to what is happening on the stock exchanges; Stock and bond markets worldwide are going through a dramatic period. “The normal correlations have disappeared. Gold prices have risen sharply, even though US long-term rates have shot up and the dollar is strong,” Ole Hansen, head of commodity strategy at Saxo Bank, told The time. The fact that the gold and bitcoin prices appear to be decoupled from the price movements of (American) shares makes some analysts point to their mutual correlation.
This supports the argument of bitcoin evangelists that so-called digital gold offers the same safe haven benefits as real gold. But with bitcoin, there may be other reasons for the price increase than distrust of the establishment.
The gold price has climbed above the $2,000 mark, the highest level in a decade. Is gold back as a refuge?
JAN VAN CUTSEM. “Every time things go wrong in the world, people turn to the only refuge that is left. That’s nothing new. In geopolitical conflicts, such as what is happening now in Gaza, you will see spikes, abrupt price movements. During economic storms you see the price rise steadily but less quickly. The concerned people are more likely to step in gradually.
“The uncertainty surrounding the banks plays a role. But for example, the questions that arise from debt-accumulating governments are also causing investors to flow out of the bond markets. In addition, Germany, which is faltering as the engine of the European economy. China, the world’s second largest economy, which is also not quite operating at 100 percent. The disagreement in Europe, about all kinds of matters, also drives people to gold.”
Can you explain the uncertainty surrounding the banks? And doesn’t a similar sentiment apply to Bitcoin, the anti-banking tool par excellence, so to speak?
VAN CUTSEM. “People have become afraid of the banks. In America, two banks, Silicon Valley Bank and First Republic, collapsed in March. That makes many people think.
“Anyone who, in addition, has a lot of money in his or her account and receives less interest on it or even has to pay penalty interest: that is not profitable. There are often people who withdraw some money from their account or sell shares and invest that freed up capital in gold. Just to get out of certain rates.
“The banking world is relatively unfriendly towards customers. For example, you would rather not come into the office. That all plays into the general atmosphere. All those little things also contribute to this.”
THOMAS SPAAS. “I do get some nervous questions from customers, questions that may even be unrelated to bitcoin. Owners of SMEs who question the liquidity of their bank, for example. But that nervousness is not the main driver of the bitcoin price increase.”
‘Because they notice that the interest among their customers is so great, big boys such as BlackRock and Fielity are eager to offer a bitcoin tracker’
Thomas Spaas, tax lawyer
Why is Bitcoin increasing so much in value?
SPAAS. “Because of positive news from the regulatory camp. It’s like this: so far, the American stock market watchdog SEC has never approved ETFs. ETFs – or index trackers – are structured products for people who know nothing about bitcoin but want to invest in it. Strangely enough, a tracker that follows bitcoin futures was once approved, but one that follows the bitcoin spot price was not allowed.
“On October 23, early last week, the judge scolded the SEC. The judge ruled that the stock exchange watchdog had no reasons not to approve this. The SEC cited market manipulation as an argument against the approval. The judge responded, firstly, that you also have that in traditional markets, and, secondly, they had approved all those futures ETFs, and therefore had no leg to stand on.
“In the coming months, everyone expects to see several ETFs emerge as a result of that court ruling. Including those of BlackRock, Fidelity, and all the investment behemoths. Because they notice that their customers are so interested, they are eager to offer such an ETF.
“There was also positive news from the ant’s nest of the FTX lawsuit. Now they could recover 70 to 90 percent of the assets of the collapsed stock exchange. I don’t know at what value. But many people will still see much more of their money than expected.
“There are currently not many bitcoins on it crypto exchangesso it doesn’t take much to send the price up much.”
How do you read the bitcoin market now? Do you dare to make predictions?
SPAAS. “We see that this time the big wave of small investments has not yet started. If we look at the blockchain data, today it concerns larger transactions of 100,000 dollars or more. The market is really dominated by big boys.
“Two-thirds of bitcoins have still not moved through the turbulent past years. The people who once bought them really look at the long term, even decades. That is also why there are so few bitcoins on the stock exchanges and why a few movements can have a big impact on prices.
“As for the future, I’m always bullish.”
What does the near future look like for gold?
VAN CUTSEM. “The World Bank says that the gold price will rise 6 percent in 2024: I do not participate in such precise predictions. That’s like looking at coffee grounds. It will remain at this level or increase slightly, write that down.”