Gold and Bitcoin: Vital Challengers to Fiat Currencies

Gold is not just breaking records... it passed the $2,300/oz mark on Thursday this week, rewarding the patience of investors who've stood by its enduring value.

As gold sets new all-time highs, there's another asset that's demanding the world's attention: Bitcoin. Some have called Bitcoin the digital gold of the 21st century – but is that true? Does it have a place in your portfolio? This week's Nuggets dives deep into the heart of this discussion.

Let’s get started.

UBS Analyst Says This Gold Rally Isn’t About Inflation  
In a recent note, wealth managers at UBS said rising gold purchases by central banks worldwide have reached the highest levels since the 1960s. These bets by central banks could be seen as hedges against the dollar as a reserve currency. Especially coming from nations such as China, they could also represent precautions against future sanctions, in anticipation of still more geopolitical disruption.

Gold Reaches $2,300 – Silver Tops $27  
Gold passed $2,300/oz briefly on Thursday. The world’s most popular precious metal has risen more than 10% this year already, setting a series of new record highs along the way. Meanwhile, silver climbed 4% to close at $27.18/oz on Wednesday, the highest level since June 2021.

Gold to $2,500 Says JP Morgan Chase  
JP Morgan Chase says gold is their No. 1 pick in commodities markets for 2024, with the potential for the price to reach $2,500 an ounce this year, according to the bank’s global head of commodities research.

Gold’s Rally Makes Front Page of Financial Times
The Financial Times has published a front-page article titled “Gold record: Global jitters reinforce rally,” where they share many ideas that we’ve championed at GoldSilver for years:

“The metal touched $2,295 per troy ounce yesterday, extending a rally that has seen it rise 15 per cent since mid-February. Investors are betting it will fulfill its traditional rose as a hedge against inflation if price increases persist when interest rates start to fall.  

Gold is also seen as protection against rising U.S. debt and possible widening of war in the Middle East. Central banks and Chinese consumers are buying in record numbers.”

Silver’s Turn to Shine: The Next Breakout Commodity
Gold is in the spotlight, but silver could be next. In a recent report to customers, Sprott outlined three reasons why silver is poised for a breakout sooner rather than later:

1. Silver is maintaining its monetary value as gold prices go higher from central bank and sovereign buying.
   
   
2. Silver's correlation to the reflation trade. Silver has often correlated with broader economic activity due to its wide range of industrial applications.
   
   
3. The massive consumption of silver for photovoltaic panels due to the new growth phase for U.S. electricity demand.

Many are Still Woefully Unaware of the Value of Precious Metals  
If someone came up to you and offered you a bar of chocolate or a 100 oz bar of silver, which would you choose? For investors aware of the value of precious metals, that’s a pretty easy no brainer.

But you’ll be stunned when you see what really happened.

Which U.S. state is nicknamed “the Silver State”?

A. Nevada
B. Texas
C. Arkansas
D. Alaska

Scroll to the bottom of this email for the answer...

Gold Investors Are in the Black

It’s been a stellar year for gold. Gold is up over 10% year to date – and up 38% from Its low in 2022.

As gold has reached new all-time highs, now every GoldSilver customer who has purchased gold from us over the past 14 years – and held onto their investment – is currently seeing a positive return on their investment.

There’s a few reasons why gold is continuing to surge:

• Central Banks are buying gold at an unprecedented pace
• Countries continue excessive currency printing, diluting their value
• The world has a massive debt problem which undermines confidence in traditional financial systems    

These trends have been pushing gold’s price higher and show no signs of slowing down.

History shows that the most effective way to protect yourself during times of economic turmoil is gold. Take control of your finances and build your gold portfolio today. Now could be the perfect time as the yellow metal continues to break new ground.

Add to Your Gold Portfolio Today

Bitcoin: The Digital Challenger in the Investment Arena

Bitcoin has once again captured the headlines, surging to new all-time highs (over $73,000 in recent weeks) and reigniting the debate about its place in the investment world. Much like gold, Bitcoin has been touted for its potential to act as a hedge against inflation and economic uncertainty.

Both assets share a common appeal among investors seeking alternatives to traditional financial systems and currencies. However, while Bitcoin and gold have parallels in their investment narratives, they also possess distinct characteristics that investors should consider.

The Rise of Bitcoin: A Brief Overview

Bitcoin, the first and most well-known cryptocurrency, was created in 2009 as a decentralized digital currency without a central bank or single administrator. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Its creation was partly in response to the 2008 financial crisis, with a goal to offer a new form of money that is borderless, censorship-resistant, and not subject to the whims of central banks or governments.

Common Ground with Gold Investors

Bitcoin and gold investors often share a skepticism of fiat currencies and concern over the devaluation of money due to excessive printing by central banks. Both assets are seen as ways to preserve wealth outside the traditional financial system. Bitcoin seeks to mimic gold’s natural scarcity through an artificially-imposed supply cap; there will only ever be 21 million bitcoins. Similarly, both assets enjoy a predictably low rate of new supply issuance each year, unlike their unpredictable fiat counterparts.  

The built in scarcity of Bitcoin, combined with its revolutionary technology, is part of the reason Bitcoin’s price has gone from approximately $500 in early 2014 to over $70,000 today.

Bitcoin vs Gold Linear Scale

Bitcoin vs Gold Log Scale

The log scale shows that Bitcoin has outperformed gold by nearly two orders of magnitude. There's no denying, Bitcoin is the best performing major asset class of the last decade. That’s because Bitcoin is essentially a brand-new asset on the world investment stage. It has been – and still is – in the price discovery stage. Gold, in contrast, is already a mature asset that has been around for thousands of years. It won’t see 100x returns, but it also will never go to zero.

Diverging Paths: Volatility and Tangibility

As you can see in the chart below, Bitcoin's price is known for its volatility. This volatility is partly due to its relatively small market size and speculative trading, which can result in dramatic price swings that occur in short periods.

In the last 10 years (since April 2014), Gold's biggest one-day move was +5.95%. In this time period, it has never lost more than 5% in a day.

Bitcoin, in contrast, has lost 5% or more in a day on 232 days! That's 6.4% of days! It has also gained 5% or more on 253 days. Bitcoin's biggest swings in the last 10 years have been +27.2% and -28.9% in a single day.

If you're looking to invest over the long term, and you're comfortable with volatility, Bitcoin might seem more attractive. Its geometric average return is over 50% per year for each of the last 10 years, for a net return of +13,000%. Gold, on the other hand, has only returned 4.67% each year, for a net return of +73% over the last decade.

The Drawbacks of Both

Bitcoin's digital nature means it lacks the physical tangibility of gold. Gold can be held in your hand, stored securely, and has been recognized as a form of currency and store of value for thousands of years. The digital world of Bitcoin offers some advantages in terms of portability and divisibility, but it cannot replicate the inherent physical value of gold.

When it comes to Bitcoin, security is entirely your responsibility. If a thief gets ahold of your coins, you’ll likely never get them back. And once it is lost, there is little hope of recovering it, as the recipient can spend/sell it just as easily as you could.

Similarly, if you send your Bitcoin to the wrong address, it’s gone forever. There’s no customer support line you can call for help.

At the same time, gold has cost that Bitcoin doesn’t have. There’s the potentially hefty one-time expense of shipping gold. There's also the on-going cost of storage, if you’re deciding to store your gold outside your home. It’s important to fully understand all the pros and cons of any investment to determine what’s right for you.

Bitcoin and Gold: Complementary, Not Competitive

Bitcoin represents a new form of asset class, offering unique opportunities and risks. While some may call Bitcoin 'digital gold,' it is crucial to understand that it will never replace real gold in an investment portfolio. Gold's enduring value, historical significance, and physicality offer a level of security that can’t be matched by digital currencies.

Interestingly, Mike Maloney has been an early investor in Bitcoin, recognizing its potential alongside gold. In 2017, he made this video on Bitcoin that’s amassed over 1.5 million views to date.

We’ve also published a more in-depth breakdown of Bitcoin vs Gold on our website, if you’re interested in learning more.

In the wide landscape of investment options, Bitcoin presents an exciting but volatile frontier. Its similarities to gold in terms of offering an alternative to fiat currencies are clear. For those who treasure the tangible security and historical resilience of gold, Bitcoin, while an innovative asset, remains a complementary investment rather than a replacement.

In our view, gold continues to stand apart as the ultimate safe haven for investors.

That will wrap up another edition of GoldSilver Nuggets. We'll be back next week with more news and updates!

Best,

Brandon S.  
GoldSilver

Which U.S. state is nicknamed “the Silver State”?

A. Nevada
B. Texas
C. Arkansas
D. Alaska

Answer – A. Nevada

The most well-known nickname for Nevada is "The Silver State," which also happens to be the state metal. "The Silver State" nickname originates from the Nevada silver-rush days of the mid 1800's, when thousands of fortune seekers swarmed Nevada in search of silver. However, the territory of Nevada and surrounding states were picked clean of silver within a few decades.