For the first time in history, Gold has broken above $2,000.
Interestingly, in the current search for alternative assets, the older generation has taken to buying gold, and the younger generation is into Bitcoin, said JP Morgan strategists led by Nikolaos Panigirtzoglou.
Over the past five months, however, both gold and Bitcoin ETFs have been experiencing strong inflows as both the old and young see the case for an “alternative” currency in the current environment, said the strategists.
Given that both the asset classes are hot right now, it makes sense to jump in both of them.
“Smart investors buy both,” said analyst Mati Greenspan.
Yellow Metal Shines
The price of gold on the spot market started climbing yesterday from about $1970 to jump 3.5% to $2,043 today.
The precious metal started gathering momentum as government bond yields headed lower and the US dollar’s recent rebound lost its strength and went back under 93.
Bullion has been enjoying a marvelous 2020 as it gained 34% YTD and up nearly 40% from March lows. This sustained rally is the result of governments across the world flooding the economies with the monetary stimulus to combat the COVID-19 pandemic.
Investors are betting that there is more uptrend coming for the yellow metal as the dollar weakens, and the interest rate remains around 0%.
Analysts at Bank of America have called for a new target of $3,000 an ounce over the next 18 months.
“When you're looking at what [DXY, 10 year real rates] levels we would need to see gold at $2500 per ounce, it is combinations like the DXY at 90 and real rates at minus 2. That will take gold to $2500. The DXY at 85 and real rates at minus 1.75 will also take you to $2500. DXY at 80 and real rates at minus 1.5 also take it to $2500 an ounce,” said Michael Widmer, metals strategist.
The market is currently watching the Fed for fresh signs of monetary stimulus that is expected to serve as a catalyst for the next move in the traditional safe-haven asset.
“Any news regarding new monetary stimulus from the US Federal Reserve could trigger gold to break up the resistance level of $2,000,” which is a “strong threshold” for its price with significant volumes placed there, said Carlo Alberto De Casa, chief analyst at ActivTrades.
So, what about the digital gold? Is it time for bitcoin to break into a new ATH as well.
Mohamed El-Erian, Chief Economic Adviser at Allianz, noted that crypto space has also benefited from the fall in the yields on government bonds and investors expanding their “search for additional risk-mitigating assets.” Still, it has been “somewhat less consistently.”
Although bitcoin is up 54% YTD and more than 190% since its March lows having broken the key $10,000 level, we are still 75% off from a new ATH. The flagship cryptocurrency seems to be in a consolidation phase before it moves higher.