The online search phrase “buy bitcoin” is now more popular than “buy gold,” according to the latest data from Google Trends.
The tide began to change in favor of bitcoin only in the spring of this year, with “buy gold” search phrase completely dominating the field prior to that.
On average, gold still wins out in 2017, but this might not be for long, as shown on the Google Trends chart.
Gold prices have had a good year so far, up about 11%. The month of September was the main highlight, with the yellow metal reaching a one-year high, but then retreating below $1,300. December Comex gold was last seen trading at $1,277.20, up 0.11% on the day.
Kitco’s senior technical analyst, Jim Wyckoff, points to higher U.S. dollar as one of the main elements keeping gold prices restrained. On Tuesday, the U.S. dollar index touched a 5.5-month high and then declined to $94.81.
“Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at the October low of $1,262.80,” Wyckoff said in his PM Roundup.
Gold will need some sort of additional geopolitical risk in order to break out of its current range, said Peter Hug, global trading director of Kitco Metals.
“Unless President’s Trump visit to South Korea today creates some geopolitical noise or a reversal of fortune hits the equity markets, there is very little in the way of catalysts to push gold above the $1,282 level,” Hug said.
Bitcoin, on the other hand, surged more than sevenfold in 2017, breaking all imaginable records, including the $5,000, $6,000 and even $7,000 levels for the very first time.
Over the weekend, the popular digital currency hit a new all-time high of $7,598, but was not able to hold onto gains and dropped down to $7089.20 on Tuesday.
Some analysts worry that this kind of price moves cannot be sustained for too long, warning of a bubble and cautioning investors not to buy bitcoin if it jumps above $8,000.
In a note published on Sunday, Goldman Sachs said that even though bitcoin could potentially hit the $8,000 level, it could be its last high, at least for a while.
“The market has shown evidence of an impulsive rally since breaking above [$]6,044,” Sheba Jafari, Goldman’s technical analyst, said in a note. “Next in focus [$]7,941. Might consolidate there before continuing higher.” – Anna Golubova
With investors searching far and wide for positive market gains, one portfolio manager is “puzzled,” as to why gold continues to be ignored and shunned.
Trey Reik, senior portfolio manager at Sprott Asset Management, noted that gold has had an impressive run since 2001, significantly outperforming the S&P 500.
“Gold has generated positive annual returns in 14 of the past 17 years. What is even more impressive is gold’s performance compared to the S&P 500 Index…,” he said in a report Tuesday. “Gold’s compound annual growth rate (CAGR) for the 16.75 years (2001 to 9/30/17) stands at 9.68% versus 6.01% for the S&P 500 Index (dividends reinvested).”
With equity valuations stretched near record levels, Reik said that the argument to include gold in a balanced portfolio is stronger than ever. He added that during the dotcom crash between 2000 and 2002 and the financial crisis from 2007 and 2008, the S&P corrected more than 50%, and gold provided “unrivaled protection” for investors.
“We are aware of no reasoning to suggest gold’s portfolio-protection benefits will prove any less potent during the next correction in U.S. equities,” he said. “Gold has done a masterful job of insulating portfolio capital from sharp declines in U.S. equities during the past three decades of financial crises.”
One of the reasons why gold has been a safe-haven during turbulent times is the fact that it has a low correlation with other traditional asset classes, said Reik. He added that the precious metal also holds its own against high-profile alternative indexes.
The question now remains: how does an investor incorporate gold in their portfolio. Reik said that through their research, the recommended allocation is between 2% and 9%.
“Broadly speaking, the higher the risk in the portfolio, whether in terms of volatility, illiquidity or concentration, the larger will be the modeled gold allocation to offset that risk,” he said.
Reik’s comments come as gold struggled to break out of a two-week trading channel as prices hovered below the key psychological level at $1,300 an ounce. December gold futures last traded at $1,276.20 an ounce, down 0.43% on the day. – Neils Christensen
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