Gold Is Trashed As USD Regains Strength; Will Bitcoin Hold Onto its Gains?
The traditional safe-haven asset has lost 5.6% of its value in three straight days of losses. The digital gold is still strong above $41k but the market needs to pay attention to the macro environment to see if USD gains take its toll.
Today, gold lost 3.14% of its value while USD gained some strength to move above 90 and Treasury yields made some recovery.
The yellow metal had a good couple of days entering into 2021 as it jumped back above $1,900, but it hasn’t been long that the bullion went down again.
Today the third day in a row that the precious metal has been going down, losing 5.6% of its value since Wednesday.
“It is the first week of January and the staying power for positions tends to be low so moves can get exaggerated,” Tom Fitzpatrick, a Citigroup's technical strategist, told Bloomberg. Fitzpatrick has been the one that predicted a $318,000 BTC target.
The weakness in gold coincides with the greenback bottoming at 89.2 on Jan. 6 to find its way back above 90 after 10 days.
“Gold and metals getting trashed. The dollar incredibly bottomed on the elections … should have gone down, but didn't. Rates behaved as expected, but the dollar turned,” noted trader and economist Alex Kruger.
Unlike gold, the stock market continued its uptrend amidst the growing speculation on further stimulus but despite a sharp slowdown in US hiring.
With the U.S. President-elect Joe Biden getting full control of Congress after the two Democratic wins in Georgia’s Senate runoffs this week, the expectation for more stimulus and higher spending on economic reconstruction has been bolstered.
However, trader TheCryptoDog suggests to “pay attention to the macro environment,” adding, “Is the Fed really going to continue such wanton debasement of the dollar?”
— Cantering Clark (@CanteringClark) January 8, 2021
Kruger also feels that “If this dollar trend were to continue for much longer it will likely take its toll on bitcoin.”
“This parabolic move upwards, with normally staid Wall Street firms including JP Morgan calling $146,000 as their price target for Bitcoin, and Guggenheim called $400,000, feels like it has a long way to go before exhausting,” is what Guy Hirsch, managing director for the U.S. at eToro believes. “It wouldn’t be all that surprising to see $100,000 at some point this year, given the current momentum.”
Looks like fairly normal price action following a #Bitcoin quantitative tightening (halving) event. Not sure why everyone thinks this is so surprising. This is what an algorithmically programmed, unmanipulated, decentralized monetary policy does. Welcome to the 21st century. pic.twitter.com/PWrDEw9pVr
— Preston Pysh (@PrestonPysh) January 8, 2021
While making these new highs every day, Bitcoin has been time and again giving small pullbacks, only to make these daily tops support the very next day for another push higher.
But the market believes that despite being in this new paradigm, “brutal retracements are still possible.”