Is Bitcoin Demand Hurting The Price Of Gold?

The popular narrative that has gripped the financial media searching for reasons that the price of gold is sluggish for reasons other than overt western Central Bank manipulation, is that Bitcoin interest is diverting cash that would otherwise be going into gold.  However, I would argue that the type of trading funds playing in the cryptocurrency “sandbox” is little more than “action junkies” looking for anything to buy with high upside velocity.  These “investors” never buy gold other than perhaps chasing gold-related securities when the price of gold speeds higher in price (like from early 2016 through August 2016).  In fact, a recent report attributes a large amount of recent volume in Bitcoin trading to  Japanese retail traders / Japanese men dominate Bitcoin trading (Deutshe Bank)

Seeking Alpha has published my analysis explaining just some of the reasons that the idea that cryptocurrencies are diverting capital away from going into physical gold is little more than anti-gold propaganda.  Note: I am not trying to discourage anyone from buying Bitcoin or any other cryptocurrencies.  Over a long enough period of time, assuming the Government stays out of the market – and I firmly believe the Government will eventually interfere with the process – the market will decide the relative legitimacy of cryptocurrencies vs gold as a store of value and as money.

This analysis focuses on the retail investor demand for gold and Bitcoin. Institutional investors, for the most part, do not invest in gold or cryptocurrencies.

I want to dispel a false narrative about Bitcoin and the price of gold. The mainstream and alternative medias have been propagating the idea that the frenzied capital flowing into Bitcoin is affecting the price of gold negatively. The idea is that Bitcoin is an alleged safe haven asset (very unproven, untested) that is diverting capital away from the precious metals. For instance:

“As gold loses steam after rallying to 12-month highs, one market expert says he is seeing bitcoin (sic) take a chunk out of the yellow metal.”  Source: TheStreet.com

This notion has no validity…You can read the rest of this analysis here: Seeking Alpha/Bitcoin/Gold

18 thoughts on “Is Bitcoin Demand Hurting The Price Of Gold?

  1. In this presentation with Ronald-Peter Stöferle :

    https://www.youtube.com/watch?v=DF5n6nmXrNo

    A tweet posted on May 17, 2011 said : “I wish i had kept my 1700 BTC @ 0.06 instead of selling them @ 0.30, now that they are at $8.00 !”

    In this presentation we can see the free cash flows of HUI companies in 2016 higher than in 2011 !

    Another presentation :

  2. I concur with your assessment Dave. I have friends in Japan
    and most who are trading Bitcoin are either former or current
    Forex traders. These are gamblers in the purest form.

    1. If it looks like a hyperinflation, walks like a hyperinflation, and talks like a hyperinflation, then it just might be…hyperinflation!

    1. There is no point applying normal logic to this bubble, folks. BTC seems to have the support of TPTB or else it wouldn’t have survived and thrived. I mentioned some months ago that BTC has stolen gold’s thunder. It was trading well below 3k per coin. Around the same time I overheard someone at the office saying buy just one bitcoin and forget about it for a few years In case the mania keeps growing and takes the price to a million or something. I thought surely the bubble must have reached its apex now but apparently not! The price is 500% higher now and not showing signs of stopping any time soon.

      1. Friday, December 15, 2017
        Carlyle Plans to Profit from Cashless India

        The Carlyle Group announced the closing of its investment in cashless India. Their press release stated

        State Bank of India (SBI, NSE: SBIN) and The Carlyle Group (NASDAQ: CG) today announced that they have completed the acquisition of GE Capital Group’s (GE Capital) entire stake in SBI Card, the second-largest and fast-growing credit card franchise in India.

        SBI Card is operated through two joint-venture companies, SBI Cards & Payment Services and GE Capital Business Process Management Services, which issue credit cards and process card transactions in the Indian market. SBI and Carlyle now own 74% and 26% respectively in each of the two entities.

        Six months ago Carlyle co-founder David Rubenstein met with India’s Prime Minister Modi

        Carlyle is now part of Western firms who want to foist card fees on Indian citizens.
        Posted by PEU Report/State of the Division at 9:55 PM

        http://peureport.blogspot.com/

        It’s all intertwined.

  3. Bitcoin is kicking Gold & Silvers’ butt because Bitcoin is RARE.

    Gold & Silver haven’t been rare due to supply increasing over 100-fold by the weekly dumping of millions of ounces of paper Gold & paper Silver onto the markets.

    BOTTOM LINE:

    * Bitcoin is rare.

    * Gold/Silver are no longer rare.

    1. Gold & Silver could become rare again if; the Mining companies & Institutional Investors who invest in the mining co’s actually made a real effort to reign in the fraudulent Paper Gold&Silver markets.

      1. Oh, I forgot – is there a Bitcoin futures market now? Wait, there’s two of them, that’s right. They settle in Bitcoin, right? Oops again. They settle in cash. But the Fed has limited the amount of cash it issues so cash and Bitcoin are the same, right?

        1. The Bitcoin futures markets are only days old … it’ll take the CME (US Govt. proxy) a year or 2 to destroy Bitcoin, imo … the COMEX & LBMA long ago perfected the destruction of Gold/Silver supply rarity.

          1. Ha ha ha. Tell China that the physical gold market has been destroyed. The country is sure spending on a lot o money on physical gold importation for an asset that, as you claim, has been destroyed. Jeezus christ enough of your lunacy.

    2. Bitcoin is rare? WTF? Ya, I’m sure the NSA has no ability to hack the Bitcoin blockchain. Sure go ahead and keep dreaming about that. Notwithstanding that, there’s 1000’s of competing cryptos. Rare my ass. About as rare as beach sand. This is just like the dot.com bubble: “hey man, it’s a new economy…revenues don’t matter, man – it’s all about clicks and eyeballs – it’s different this time – all ya have to do get a URL and take it public and you’ve created rare wealth.”

      1. Why fight it…let it go..I kind of agree with Roy Sebag’s take on this:

        Roy Sebag‏Verified account @roysebag Dec 7

        I said it first on the @maxkeiser show a year or two ago, Bitcoin specifically and cryptocurrencies in general will make Central Banks and Governments BEG for the return of a gold-standard. History will not be kind to the fiat experiment which began in 1971.”

        https://twitter.com/roysebag/status/938812147802525697

        Who ever is running this game it’s duplicating the something out of nothing central banking model….the higher it goes, the more it potentially consumes.,,,but they’re not channeling it.

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