The chart clearly shows a breakout on the down side. This is follow up to my last post.
Here are my 5 reasons
1. Interest rates: Interest rates are historically low and are unlikely to go down any further. Long term yields are itching higher already. Interest rates are not going to help gold anymore.
2. Inflation: Inflation is likely to be itching higher with so much stimulus. If that happens, federal reserve may decide to push interest rates higher which would pull dollar value higher too. If dollar goes higher, then gold prices will have to move lower.
3. Stock Market: Capital markets are doing great. Investors do not really seem to worry about the stock markets going kaput. Thus, little reason for the money to flow into gold.
4. Cryptocurrency: The crypto rally might be eating into gold investments as the 20 something are not so keen to invest into gold as much as they are about cryptocurrencies. With bitcoin rallying, gold may lose its sheen.
5. Other metals: Other metals have been giving gold a run for its money. With economy coming back, gold may not be remain the most favored material in 2021.
How would you play the bear case?
Do you agree with my analysis?
Here are my 5 reasons
1. Interest rates: Interest rates are historically low and are unlikely to go down any further. Long term yields are itching higher already. Interest rates are not going to help gold anymore.
2. Inflation: Inflation is likely to be itching higher with so much stimulus. If that happens, federal reserve may decide to push interest rates higher which would pull dollar value higher too. If dollar goes higher, then gold prices will have to move lower.
3. Stock Market: Capital markets are doing great. Investors do not really seem to worry about the stock markets going kaput. Thus, little reason for the money to flow into gold.
4. Cryptocurrency: The crypto rally might be eating into gold investments as the 20 something are not so keen to invest into gold as much as they are about cryptocurrencies. With bitcoin rallying, gold may lose its sheen.
5. Other metals: Other metals have been giving gold a run for its money. With economy coming back, gold may not be remain the most favored material in 2021.
How would you play the bear case?
Do you agree with my analysis?
Comment:
Inflation may mean dollar would come down and the gold prices will move up but dollar has shown great resistance to go down in value in the past inflationary environments. Usually interest rates rise and dollar stays stable. I am thinking same may happen in future too.
Comment:
Velocity of money is a factor too as I heard on Bloomberg that it is slow but I think consumers would spend for sure and one can almost count on them to do so. As that happens and inflation creeps in, feds will likely go back to interest rate hikes to control inflation and keep dollar stable.
There aren't many factors calling for gold's rise anymore. Young generation doesn't see it as valuable as the older generation.
Bitcoin might end up being the gold of future. After all, just like gold, it is limited in supply too. Perhaps, this was the intention behind "mining" coins after all. Not to replace currency but precious metal; precious because people consider so. What happens if we stop piling gold and instead start piling bitcoins?
Legitimization of bitcoins would certainly bring end of gold as hoarding metal. Very bearish on gold.
Any feedback?
There aren't many factors calling for gold's rise anymore. Young generation doesn't see it as valuable as the older generation.
Bitcoin might end up being the gold of future. After all, just like gold, it is limited in supply too. Perhaps, this was the intention behind "mining" coins after all. Not to replace currency but precious metal; precious because people consider so. What happens if we stop piling gold and instead start piling bitcoins?
Legitimization of bitcoins would certainly bring end of gold as hoarding metal. Very bearish on gold.
Any feedback?
