As analyst Luke Martin puts it in bitcoin terms, “gold is going through un-announced (refiner) halvening.”
The demand for safe haven asset gold is surging and the price of the precious metal has increased 5.6% yesterday but with mining operations slow, the bullion is expected to rally to new heights. This has been the largest one-day dollar gain for the metal since November 1984. The move came on the back of the Fed’s decision to unleash unlimited QE.
Meanwhile, a crunch in supply is currently being witnessed. Three of the world’s largest gold refineries that process a third of global annual supply reported on Monday that they have suspended the production in Switzerland for at least a week. This has been on the back of the mandatory closure imposed by the local authorities to prevent the spread of coronavirus.
Dublin-based GoldCore said it “experienced record demand in recent days and the global supply of gold and silver bullion coins and gold bars has quickly evaporated.”
Retailers are already reporting shortages and delays of 15 days on shipments while the demand has gone up to five times the normal daily amount.
Moreover, the supply routes are strangled because of the lockouts and grounded planes, not allowing gold to be moved around the globe. The yellow metal is shipped around the world on commercial flights, linking the trading hubs with refineries and vaults. But as coronavirus shuts down the refineries, it is becoming harder to trade gold.
This led gold futures to shoot to the highest premium with the spread between New York and London gold price skyrocketing, last seen in 1980, showing how desperate investors are to find a safe haven.
The bigger problem, however, remains the shipping of gold as one puts it, “There are enough kilobars around: the issue is how to get it where it's wanted.”
And this is exactly what the bitcoin commentator has been repeatedly talking about. Gold proponents continue to argue that there won’t ever be the need to carry the bags of gold but today as the nations are into lockdown because of COVID-19, this is exactly what is happening.
12 month performance of assets:
S&P: – 14%
DJIA: – 21%
Gold: + 25%
Bitcoin: + 69%
Educate yourself. Wall Street ain't looking out for you!
— Pomp 🌪 (@APompliano) March 24, 2020
Bitcoin as a digital gold narrative gaining traction
Interestingly, just like gold, bitcoin has been seeing a jump in price, today it momentarily went to $6,990 on Bitstamp. When it comes to the past 12 months performance, while gold is up only 25%, bitcoin is up by 69%.
Gold is down 13% since 2011 highs. Bitcoin is up *6000 times+* since early 2011. Bitcoin also outperforms gold in most standardized time periods. Once again, history and standardized performance conveniently ignored. Why not be fair to Bitcoin?
— Gabor Gurbacs (@gaborgurbacs) March 24, 2020
Though since then, the price of BTC has gone down again to about $6,600, the world’s leading cryptocurrency is preparing for its supply crunch in less than 50 days which is expected to boost its price as well.
Gold has actually become the “most used” word in Bitcoin tweets, with 63% being positive. Also, mentions of Gold in Bitcoin headlines are nearing their all-time high. “The bitcoin as a digital gold narrative has begun to gain significant traction once again,” noted crypto data provider The Tie.
However, while the adoption of Bitcoin among institutions on the basis of volume on CME is around $300 billion daily in the past few days, gold which is in the focus has its COMEX futures trading $100 billion volume yesterday and $20 billion in options.
As gold pushed higher, Goldman Sachs told its clients that it’s time to buy the “currency of last resort” which fell 1% today.