Cloud Hosting

Is gold or bitcoin a safe haven?

Bitcoin has done very well for several reasons but one of them is certainly the threat of inflation.

Inflation is a funny subject because no one really talks or cares about chronic high-ish inflation below the threshold of runaway inflation; it is hyperinflation that is the bogeyperson. You would think inflation has to be hyperinflation to count and that is wrong. Nine percent yearly inflation will do any saver mischief over five to ten years and that level has hardly been rare either over time or geographically. It does not take double or triple figure inflation to cut moneys value in half within a decade. The fear of high double figure inflation or hyperinflation is growing because people have seen that incredible amounts of token money has been created out of thin air and it is intuitive that this will debase currency. This intuition now seems to be playing out in front of us.

The first stop to find a haven was bitcoin, not gold, because to the tech capable and the savvy bitcoin is far more convenient and flexible than any other alternative to swap fiat into when you want to and must do it now. It is also a lot more fun.

This has put gold in the shade because bitcoin diverted a whole generation and further cohorts of natural gold haven investors away from its nexus of gold bug-ery and into the wild world of crypto. Bitcoin went through the roof and out the window went the haven ideal. Who needs a haven for your cash when you can stack it in the latest revolutionary asset that showers you in profits?

Meanwhile, there was the slump in demand for gold from a Covid-hammered jewelry trade and undermined by distressed selling from hoarders caught up in financial difficulties created by the pandemic. These factors have suppressed the performance of gold.

Plenty now changes that picture.

On its current trajectory, the reopening of the world economy will restart the jewelry trade, so demand for gold will experience a strong recovery.

I believe even more importantly, bitcoin when its on the up is a great haven and a fantastic investment. When its crashing, its the worse haven in the world. A crash is exactly where we are right now; it has crashed and to me it will keep on falling to perhaps the 75%-80% down level of this kind of market cycle. Faced with a crash, haven asset investors have and will flee bitcoin and they will naturally go to gold.

So this is the chart I put in previous articles laying out the development of this setup. It is the recent bear trend:

The gold chart shows a strong bear trend

And here is the breakout set up:

The breakout set up for gold

...and here we are now:

The current gold chart shows a promising bullish development

Pulling back to the long term, if gold is going to reestablish itself as the go-to haven for the inflation expectant, the upward price action is going to be in this kind of area:

The gold chart could show this upward price action

Bears will quite rightly call the above chart an obvious bearish double top. However, the fundamentals to me make that seem very unlikely.

So what is an investor to do?

If they are torn, then its the easiest thing to wait for a move up to a new all time high before doing anything. There is a lot of headroom for a bull run beyond that level so there is no pressing need to be hasty.

It strikes me that we are living in a world of parabolic price action and I cannot look at this chart without seeing the foothills of such a move developing in gold. Thats a brave call, but I highlight it because it is a possibility.

This seems really exciting until you ponder what is causing all these moonshots in different assets and the simplest answer is unsettling. Around us is a diked inflationary sea, kept out by financial defenses keeping inflation hemmed out of the wider economy but drowning other assets, like real estate, equities and crypto, which lay beyond those levies in inflationary price rises.

Now with Covid-wrecked sovereign finances, economies relying on those defenses may see them breached through necessity, and if those liquidity controlling dykes are opened or swamped, then the doom-laden fantasies of hyperinflation could come to pass and if they do then parabolic prices will be the norm every day and everywhere.

Clem Chambers is the CEO of private investors websiteADVFN.comand author of 101 Ways to Pick Stock Market Winners andTrading Cryptocurrencies: A Beginners Guide.

Chambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards in 2018.

See original here:
Bitcoin Vs. Gold: Surviving Inflation - Forbes