Gold is coming back. Despite speculation that Bitcoin and other cryptocurrencies are making the metal less valuable every day, long-term predictions for gold look better, according to a new report from Barron’s.
Recent crypto turbulence, including the sudden collapse of bitcoin last week and the failure of the Doge Doge to push the meme-created Dogecoin by more than $ 1, have forced JP Morgan financial derivatives strategists to predict a shift in bitcoin futures. After the cryptocurrency failed to break above $ 60,000, traders began to cut their positions.
See also: Who Unleashed the Doge: Waiting for Doge Day keeps value afloat
Meanwhile, gold is gaining strength again. The yellow metal showed a slow but steady recovery, closing at $ 1800 an ounce. A note to clients released last Wednesday by the Bespoke Investment Group, still below its $ 1951 an ounce peak, said gold has broken through the 50-day moving average, a sign of a short-term trend.
In addition, gold mining companies have rebounded, outperforming the broader stock market, including several names in Sprott Gold Miners ETF (SGDM) and ETF Sprott Junior Gold Miners (SGDJ)… (Gold stocks are often an indicator of the trajectory of the bullion itself.)
Why gold is now stronger than cryptocurrency
Aside from the disruptions in the bitcoin market, gold has also experienced relative strength compared to cryptocurrency due to declines in real long-term interest rates (i.e. inflation-adjusted bond yields) and inflation concerns.
This drop in real rates can be seen in the yield on Treasury Inflation Protected Securities (TIPS), which pay real returns, even if their principal is adjusted to reflect changes in the CPI.
The yield on 10-year TIPS declined from -0.56% in mid-March to -0.78%, despite the bond market as a whole rallying.
With inflation looking inevitable, gold and mining stocks are likely to strengthen further.
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