What’s Different Today? Cryptocurrency
However, this time there is a cryptocurrency alternative to gold that didn’t exist in the other two case study periods.
So, we don’t know how much of the gradually rising uptrend in the gold price that has occurred in the last two years is related to presidential approval ratings for Obama and Trump. And we don’t know how much the cryptocurrency price increases originate from crypto substituting for gold. Maybe it is some of each.<
We do know that there are movements in some official gold transactions. We have seen transactions reported by Turkey. (See “Gold: A Loser Despite Turkey’s Mysterious Demand”)
And we have seen official sales by Venezuela, which is desperate for liquidity. We are also watching China increase its gold reserve holdings. We know that the collective central banks of the world have increased their assets to about $22 trillion, and even though the Fed is now starting to shrink its balance sheet, combined central bank asset growth is running at about $300 billion per month. (Sources: Bloomberg and hat tips to Dennis Gartman, Mark Grant and Ed Yardeni.)
We know that those reserve additions are mostly in fiat currency asset denominations, very little in gold and not in crypto at all.
Let’s segue to the crypto-gold debate.
With permission, we are extensively quoting Nick Colas and Jessica Rabe from their newsletter. We know their excellent work from previous affiliations and are delighted to see them venture into this newly launched service. Readers are encouraged to give it a try. Their website is http://datatrekresearch.com/.
Regarding bitcoin and gold they wrote:
"Physical gold is the world’s oldest store of value; bitcoin is a baby-faced newcomer. But the two have many common features, such as limited supply, efficiency/portability, and privacy. Bitcoin has a long way to go (about 5,000 years) before it can match gold’s success, of course. Gold has a different but equally important challenge – maintaining its relevance in an ever-more digital world.
“That’s what makes the whole bitcoin vs gold debate so interesting. A long-time incumbent and a new kid on the block, competing for attention. It’s not quite the Rumble in the Jungle, but close enough.