Gold shines, Bitcoin volatility

Gold eyeing USD2000 level

Gold’s New Year’s resolution to return to record high territory got off to a great start.  A dollar in freefall kickstarted gold’s rally and expectations are high that will continue with a Biden administration that includes former-Fed chair Yellen running the Treasury.  Light at the end of the COVID-tunnel is driving the reflation trade and that is expected to be the catalyst that takes gold back to record highs.

It feels almost that we are waking up to a new world of inflation as the 10-year breakeven rate tests the 2.0% level for the first time since 2018.  The Fed has made it clear they will allow inflation to overshoot their 2% and that will do wonders for the gold holders.

Gold appears to have got its groove back and should be eyeing the USD2,000 level in the short-term.

Bitcoin surges past USD30,000

For those casual crypto followers, they are looking at their Bitcoin charts in awe as prices have surged above the USD30,000 level to start the New Year.  The surge above USD30,000 occurred on Saturday and most of that move was attributed to the never-ending recycling of the institutional interest story.  Bitcoin skyrocketed to USD34,723 yesterday followed by a plunge of almost 20% exactly and has rallied back above USD31,000.

Bitcoin volatility is here to stay and that should scare away many investors.  The appeal of the recent bitcoin rally was steady flows and healthy consolidations before massive price rallies.  Bitcoin’s wild swings will likely spark interest in some of the other cryptocurrencies, such as Ethereum.  Over the weekend, it seemed ambitious calls for Bitcoin to rally towards USD50,000 became the consensus on Wall Street and that provided the last bit of exhaustion to this historic rise.

Bitcoin demand should remain healthy in the first quarter, but the growing hedge fund presence will make this an interesting ride.  Following a significant plunge during a relatively healthy macro environment could lead to a healthy consolidation for Bitcoin.

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