GOLD 00.00 1.20 0.00%
SILVER 00.00 1.20 0.00%

Metal Market Report January 2018 - Week 4 Edition

January 2018 - Week 4 Edition

Bitcoin Falls 53% in One Month!

In the last month, gold is up $95, and Bitcoin is down $9,500!  The first official trading of Bitcoin in America was introduced on the Chicago Board Options Exchange (CBOE) on December 10, 2017. Less than a week later, we saw the bubble peak of Bitcoin prices at $19,870.62 on December 16.  (Unlike most financial markets, Bitcoin trades 24/7 around the world, somewhere, electronically, including weekends.)

Last Wednesday, January 17, 2018, Bitcoin dipped to $9,325 for a decline of more than 53% in one month.  It has since recovered, but this shows how volatile the cryptocurrency trading has become.   Gold is a more established market.  It will never have those kinds of wild swings again.  This makes gold and gold coins seem boring by comparison to Bitcoin, but it is a more stable investment, and one you can hold in your hand.

The U.S. government accepts gold as legal tender – and has minted gold as legal tender for centuries – but it will resist Bitcoin.  Fed Chair Janet Yellen said Bitcoin is “not legal tender.” Gold has several approved and established exchange traded funds (ETFs), but The Wall Street Journal reported last Thursday that the United States Securities & Exchange Commission (SEC) will oppose any proposed ETFs that would trade Bitcoin options and futures. Furthermore, U.S. Treasury Secretary Steven Mnuchin recently called for G20 nations to prevent cryptocurrencies from becoming the digital equivalent of a Swiss bank account. 

Gold is a proven store of value for 4,000 years.  Bitcoin is a line of computer code invented less than 10 years ago. It may prove to be an elegant way to pay bills over the Internet but it is not yet a store of value.

Gold Up $95 in Last Five Weeks

Gold rose $8 last week and is up $95 over the last five weeks.  Stocks have been rising much faster, but they have been rising so fast that they have entered what many investors fear is a “danger zone.”  The technical term is that stocks have become “overbought,” meaning that everyone has poured so much money into stocks that there isn’t much more money left to pour into stocks, so the first wave of selling could lead to panic selling.  The first major correction in stocks in two years could send much more money into gold and gold coins!

Is Gold on the Verge of Breaking Out?

This week’s edition of Barron’s (January 22, 2018) features a bullish article on gold (“Is Gold on the Verge of Breaking Out?”) in which some of the quoted experts predict prices ranging from $1,400 to $1,600 this year, even $2,000 as an outside possibility.  You don’t often see numbers that high these days, but Peter Spina, chief executive of precious-metals information provider, said “Gold at $2,000 is a long shot, but not an improbable target by any means.” He said that gold has already been in a “stealth bull market” since bottoming out at $1,050 just over two years ago and has risen 27% since then.

Chris Gafney, president of World Markets at EverBank says that $2,000 gold is “unlikely” this year but $1,600 is “possible.”  He explains: “Everything would need to fall into place for gold, but if we get a major black-swan event, or a major correction in the equity markets, we could easily see gold investors flock back into the market, and a 20% gain in price could occur.”  (A 20% increase from here is $1,600.)

January 18-24: Gold’s Big Week in History

On January 24, 1848, James Marshall found gold on John Sutter’s mill at the junction of the American and Sacramento rivers in California. Gold fever soon swept the nation, fueling mass migration, inflation and California statehood. Alas, Sutter and Marshall couldn’t defend their claims.  Both died in poverty.

On January 24, 1894, the Treasury’s gold reserve dipped dangerously below $100 million.  A year later, on January 24, 1895, gold reserves hit a new low of $68 million, then $45 million the following week.  This set the stage for the big debate of the 1896 elections, silver vs. gold and the “Cross of Gold” speech.

On January 18, 1974, the first New Orleans gold conference took place. On Monday, January 21, 1974, gold hit a record $161 and silver hit a record $4 an ounce, but gold was still illegal for Americans to own.  

On January 18, 1980, silver hit $50 an ounce and on the following Monday, January 21, 1980, gold hit $850 an ounce, an all-time high in real (after-inflation) terms and a level it would not exceed for the next 28 years, but this was an unsustainable one-day spike in a “bubble” market for the precious metals.


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