Key facts:
-
Both gold and Bitcoin have set new all-time highs in 2024.
-
Bitcoin is considered by many to be “digital gold.”
There are expectations that the price of gold will continue to rise, which may impact the bitcoin (BTC) market.
“Gold is set to gain ground,” says market researcher Paul Wong. In a report In this regard, he details three factors that motivate a favorable performance for gold. These are the Fed’s interest rate cut, the BRICS+ meeting and the uncertainty about the US elections that affect the value of the dollar.
He points out that the rate cut expected for September by the Fed, the US central bank, lowers the value of the dollar against other fiat currencies. In this scenario, he argues that the BRICS+ will meet to encourage many central banks to hold more physical gold as reserves.
BRICS+ is an association between ten emerging countries to maintain economic cooperation. The name of the formation is the initials of the original members: Brazil, Russia, India, China and South Africa. However, this year, the symbol + was added to the term for the integration of Saudi Arabia, Egypt, the United Arab Emirates, Ethiopia and Iran.
The next meeting of the BRICS+ group will take place in October 2024. Meanwhile, adds Wong, the US presidential elections, scheduled for November, bring uncertainty and anxiety to the stock market.
“To combat the growing global debt of $306 trillion, a new fiat monetary structure is being updated in which gold remains the most important form of money according to central banks,” the specialist points out.
Against this backdrop, the value of gold, an asset that often acts as a safe haven in crises, has been on the rise. This is happening while, as seen below, the dollar index (DXY), which shows its value against other fiat currencies, is falling. According to Wong, this is a consequence of many central banks increasing their gold reserves.
The price of gold is shown in orange and the DXY in violet. Source: TradingView.
According to the market researcher, if the dollar index falls by around 3% in the next six months, gold is likely to rise by 6% above its trend. In such a case, he projects the price of the precious metal at levels between 2,675 and 2,800 dollars (USD) in 3 to 6 months.
At the moment, Gold is trading at around USD 2,500, after having reached a record high of USD 2,528 last week..
“The recent depreciation of the dollar against physical gold reflects and exposes the weakness of the fiat system,” Wong emphasizes. The specialist assures that the main culprit is the growing fiscal deficit, which triggers more total records of Treasury bonds.
According to his vision, The link between the rising price of the precious metal and its national reserves reveals the flaws of the current fiat monetary system“Central banks are increasing gold reserves to combat global debts, highlighting the role of gold in maintaining fiat currency discipline,” he stressed.
In addition, he says that downward adjustments to economic statistics, such as the latest employment figures, are causing distrust. He therefore believes that gold will rise in the long term.
Although the specialist does not mention bitcointhis asset could have a positive impact if its projections come true. This interpretation is based on the concept of this currency as “digital gold”.
Bitcoin is considered an improved version of gold
Both bitcoin and the precious metal possess a supply limited and one Mining decentralizedThese attributes facilitate its price increase in response to demand, unlike fiat money, which can be issued indefinitely at the discretion of each government, increasing its supply.
It is because of such comparisons that many investors call bitcoin “digital gold.” It is even considered by some to be an improved version of the precious metal due to its resistance to censorship and the possibility of being transferred freely and at low cost.
In this sense, If the narrative of bitcoin as enhanced digital gold grows, it could increase its demandeven by central banks. In fact, as CriptoNoticias reported, Republican candidate Donald Trump has promised maintain national reserves in that currency if he wins the elections in the United States.
However, it should be noted that over the past two months, bitcoin has been showing a higher correlation with stocks than with gold. These are in a corrective sideways period, as seen below. Although, bitcoin is located in such a phase since the historical maximum it registered six months ago.
The price of Bitcoin is shown in orange and the SPX, an index that compiles the shares of the main 500 companies in the United States, is shown in purple. Source: TradingView.
Therefore, keep a close eye on their movementsin relation to other assets and the moves of central banks, seem key to identifying the behavior that bitcoin will follow.
Crypto Keynote USA
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.
