The impact of gold on the cryptocurrency market. Gold of the 21st century or a financial pyramid: the pros and cons of using cryptocurrencies Why these reasons are not enough

Among all other events, the main event of the outgoing week was the fall in the price of gold, which occurred on Thursday and Friday. There were several reasons for this, and the strengthened dollar is only one of them, albeit a very important one.

If we talk about the general situation in the foreign exchange market, then the answer to the question of whether the dollar has completed its cycle of decline will most likely be given by a meeting of the Open Market Committee Fed USA, which starts on Tuesday. It will also affect the price of gold. However, yesterday's fall in gold was largely due to the rapid increase in the spread between the short and long ends of US Treasury yields (Figure 1).

Yield spread between 2 year old notes and 30 year olds bonds. SourceZero Hedge

In turn, the rapid growth of long-term bond yields was due to the promises of the Donald Trump administration to publish a long-awaited renovation and infrastructure plan in early January, and although Trump made a mistake by not dragging his proposals along with tax incentives, the very fact that the plan will finally be published, had a positive impact on the stock markets and, above all, shares of construction companies.

Speaking about the future prospects of the gold market, it should be noted that according to the World Gold Council (WGC) in the third quarter of 2017, demand from ETFs fell almost tenfold - to 19 tons against 144 tons in the third quarter of 2016. In an environment where volatility is at historical lows, gold has ceased to function as an asset for risk hedging, which led to a loss of interest in gold by professional participants.

Data from the futures markets also show a drop in gold trading volumes in the second half of the year, where the open interest of trading participants decreased from 860 thousand contracts to 660 thousand contracts from September to December.

It is characteristic that from July to September speculators (Money Manager) actively increased the volume of gold purchases, and from September to November they were no less actively reducing them. At the end of October, speculators, as the main driving force of the price, began to increase their positions again, but, apparently, their dreams of profiting from the price increase will not come true in the near future.

Their net long positions are now the same as they were in early September, when gold topped $1,300 a troy ounce. Theoretically, this could indicate the beginning of the upcoming price increase, but other bidders simply close their short positions and leave the market. The loss of interest of bidders in gold cannot speak of a recovery in any way and is more of a bearish signal than a bullish one.

In this sense, it will be interesting to see what happened to the positions of speculators at the beginning of next week. A new COT report was published yesterday evening, but for now, in the context of current prospects, let's evaluate the technical picture (Fig. 2).

The technical picture of the price of gold suggests further decline

On Friday evening, gold pushed through two-month support at $1270 and dropped $20 to $1250, which is now becoming a new pivot for price fluctuations. Statistically GOLD is now also in the center of the standard deviation range, and in this sense, the price feels quite “dry and comfortable” in this zone, and in order to move it higher or lower, a trend is needed.

However, after receiving data on unemployment in the US, gold made an attempt to recover, which can serve as a technical confirmation of the breakdown of the level of 1270. After that, most likely, another sale will follow, but already to the lower limit of the standard deviation, which is now near the level of 1230, and then, further to the level of 1220, the lower limit of the range 1280 - 1220. It should also be taken into account that there may not be a return of the quote to the level of 1270, because. this, in fact, will provide a convenient point for speculative selling, and the market usually does not provide such points.

Now the question remains whether gold will be able to go below the level of 1220. Of course, on the eve of the meeting of the Open Market Committee Fed The United States cannot make any predictions, but, in fact, now there are no prerequisites for such a decrease. In general, such an opportunity can arise only if large speculators in their bulk start selling gold. But, as I see from the COT report, their short positions are now at their lowest since last summer, and in a short period of one to two weeks, they are unlikely to have managed to accumulate a critical mass capable of pushing gold to a new horizon. Therefore, the target at the level of 1190 is not visible yet.

In turn, we must understand that there is no trend - no money, unless, of course, you sell options. Therefore, until the moment when gold has the prerequisites for the start of a new trend, I will refrain from opening medium-term positions, as for short-term entries, then the strategy for the near future may be selling gold with a target at 1220 and stops above the level of 1300.

Be careful and careful, keep the risks and let the profit come with us.

Gleb Kabanov - MTrading Analyst

Jacey Collins, economist, geopolitics expert and founder of Philosophy of Metrics, believes that the gold market in the future will be completely absorbed by cryptocurrencies as financial technologies expand and develop in various sectors of the economy and the production of new financial products. According to the expert, “nothing will stop the digital asset market.”

Below are Jaycee Collins' reflections on this topic.

As of the end of 2017, the total market capitalization of the gold market was about $7.8 trillion, according to the World Gold Council. The current price of gold is 1215 USD/oz. Apart from some ups and downs in the past, the price of gold has remained flat since 2013. The stagnation in the gold market can be an indicator of many different things, but it clearly goes against the Fed's statements about the normalization of monetary policy.

"Normalization and stabilization" of monetary policy around the world has been underway for several years, but the gold market is still experiencing stagnation, which indicates the ineffectiveness of the actions taken by the Fed. This does not bode well for gold, also because the world is on the verge of adopting a new asset class that is ready to “shoot” by increasing its capitalization. During the last bitcoin ATH (price record) at the end of December 2017, the total market capitalization of the cryptocurrency market reached $800 billion. This is a small number compared to $7.8 trillion, but according to many, large institutional investments have not yet even set foot in the virtual asset market.

We may see the time when gold returns to pre-crisis (2008) price levels around $800. The lack of growth in the gold market over the past 5 years should be an indication to most investors that demand for the precious metal is experiencing a slight decline at best. But countries such as China and Russia continue to accumulate gold, and it can be assumed that they are planning to create new gold standards pegged to national currencies.

Gold standards are deflationary in nature, however, most countries now understand that the new global standard is being built around the speed, cost, and scalability of the cryptocurrency market, not gold. Perhaps Russia and China will create their own internal architecture based on gold and national cryptocurrencies, who knows.

One thing is clear, no nation or bank is interested in turning back technology and abandoning an entirely new source of liquidity, only to continue to support the precious metals market, which will somehow be swallowed up by a new asset class over the next 12-18 months. For sure, the gold market will continue to exist, but will itself become a sub-market of cryptocurrencies, just like the stock market.

Most likely, the end of 2018 will mark a massive entry of institutional investment into the crypto space, as the world's largest exchanges have already created their own systems and conditions for convenient cryptocurrency trading for millions of investors who will flood the digital asset market. Capital in cryptocurrency will flow from the gold market.

The price of gold doesn't matter if it's $800 or $1800. The real message is that an entirely new asset class will serve as a new source of global liquidity. The existing $7.8 trillion market for the precious metal will be swallowed up in one way or another by the crypto market as it expands into new areas of the financial sector and financial products. Nothing will stop him now.

It is worth noting that Gabor Gurbaks, director of strategic asset management at VanEck, is of this opinion and believes that the value of bitcoin for traditional investors lies in its ability to become an alternative to gold. Since traditional investors view bitcoin as “digital gold”, its capitalization can easily increase at least three times more.

The total market capitalization of the cryptocurrency market has recently surpassed $300 billion. Such a figure is both inspiring and scary.

The world of digital currencies, which emerged less than a decade ago, has grown astronomically in a short period of time. The rapid growth of new cryptocurrencies on the wave of the ICO boom interested investors all over the world. So, in 2017 alone, bitcoin soared from $800 to almost $10,000. There is a month left until the end of the year, and bitcoin has a chance to get ahead of the most daring forecasts of analysts and set a new record .

It turns out that bitcoin is the most impressive asset that is preparing to take over the world? You can look at the cryptocurrency market with fear, but you can approach its assessment soberly and understand that bitcoin is only at the very beginning of its development. While bitcoin is a small fish.

Cryptocurrencies vs gold

If we compare the $300 billion capitalization of the cryptocurrency market with the commodity asset market, it immediately becomes clear that the digital currency is still splashing in shallow water.

Gold, which Bitcoin is supposed to compete with, has a market capitalization of $6 trillion. In addition, it must be taken into account that only a fifth of gold is traded on the market as an investment product, the rest is in the form of jewelry, and is also in government vaults or still underground.

Thus, the capitalization of investment gold is about $1.2 trillion. Considering that the value of all gold is just over $7 trillion, about $1.6 trillion is used for private investment, which is more than 5 times the total capitalization of cryptocurrencies.

Let's take a closer look at the investment markets. Stocks, another investment asset, have a market capitalization of $55 trillion; another $94 trillion in mortgage-backed securities (securitization) and $162 trillion in residential real estate.

The price of bitcoin is not too high

Of course, the price of bitcoin breaks records in terms of speed, but the size of capitalization is low compared to the global market. Looking at the capitalization of various areas related to investments, it is difficult to call bitcoin a bubble. The cryptocurrency market is only 0.3% compared to the total real estate market, securitized debt, equities, commercial real estate, farmland and gold.

Assessing the above indicators, Bitcoin and other cryptocurrencies can hardly be called a huge bubble.

When it comes to bubbles and revaluation, the investor and ardent supporter of bitcoin says:

“Now there is $200 trillion in the world - in cash, stocks, bonds and gold. These four assets are, in my opinion, overvalued. If 0.5% of that $200 trillion is in bitcoin, you will have a capitalization of $1 trillion, which will be higher than that of Apple Computers, the most valuable company in the world.”

According to experts, gold is one of the most effective and stable capital saving instruments. What is the metal price today and what are the forecasts regarding its dynamics in the future? What factors influence it? In our article you will find answers to all these questions.

Gold price today

You can find out the current price of gold by calling the operator or on the official website of Sberbank of Russia. It is the largest bank in our country in terms of the volume of transactions for the purchase and sale of metals.

It should be taken into account that the price of gold of the Security Council of the Russian Federation may differ in small and large cities of the region.

The form of purchase also matters: an ingot, a coin, or a bank account in metals. The first two types are higher in cost, as they include another 18% VAT. In addition, the cost of a gram of gold, for example, in a five-gram bar, will be 20 or 30% higher than in a kilogram.

How is the price per gram of 14k gold calculated?

585 gold is used for making jewelry. Naturally, with an increase in demand for them, the cost of the metal also increases.

To calculate the price of 1 gram of gold 585, you need:

the price for 1 gram of gold 999.9 at the rate of the Central Bank of the Russian Federation multiplied by 0.585

Factors that increase its cost:

1. Calendar holidays and celebrations;
2. Economic instability, inflation;
3. Increasing the share of imports in foreign economic activity;
4. Commodity price fluctuations: gas and oil;
5. The weakening of the dollar.

However, recently there has often been a trend when the growth of the dollar is accompanied by an increase in the value of gold.

Gold price forecast: will the value increase or decrease?

The price of this precious metal has increased almost 7 times over the past decade. It follows that in the long term, gold will only grow and bring stable profits to its investors. Insignificant short-term depreciation associated with a decrease in demand is acceptable, but they will not play a significant role.

Gold bought at the beginning of the year will bring a profit of about 6-13% per annum at the end of the year, not counting bank fees. With an increase in the rush demand for this precious metal, its profitability may increase even more.

Capitalization of gold in the short term

In the short term, gold will bring superprofits during the period of economic instability of the country producing the precious metal. Political and financial crises, natural disasters will cause a reduction in the volume of supplies, which, accordingly, will increase the value of gold.

Advice from Sravni.ru: To get more profit from investing, it is better to choose an impersonal form of gold - a metal account. In this case, the purchase price will not include VAT and will not require additional savings and security costs. The main thing is that it will be much easier and faster to sell such gold.

Critics of cryptocurrencies argue that this market is built on sand and does not have a solid foundation to support incredibly inflated quotes. But the tokenization of gold has led to the emergence of gold-backed cryptocurrencies. The appearance of real value in digital coins cuts the ground from under the feet of critics.

The cryptocurrency market is experiencing rapid growth. The price of Bitcoin has already broken through the $7,000 mark, andis worth more than $300 with a capitalization of about $30 billion. You can also remember Ripple and other cryptocurrencies that have emerged in different parts of the world.

Given the recent advances in blockchain technology, it is safe to say that this market has a bright future ahead of it. Individuals, corporations, and even governments in some countries are showing a keen interest in the opportunities offered by the cryptocurrency market. Indeed, cryptocurrencies have literally burst into financial markets, and many experts see them as the future of payment systems.

Lack of material value of cryptocurrencies

But critics of cryptocurrencies argue that there is no real reason to support such inflated prices. The market capitalization of Ethereum is about 30 billion and Bitcoin is over 100 billion US dollars. This is more than the market capitalization of such powerful global corporations as BHP Billiton, Morgan Stanley and Goldman Sachs.

Most opponents of cryptocurrencies becoming the main means of payment in the future base their arguments on the fact that there is no single regulator in this market. Others believe that this market will soon collapse, since cryptocurrencies have no material value.

In the case of traditional currencies, central banks have reserves of gold bullion, the economy and other valuable assets that are designed to support the value of the respective country's currency. All this gives the paper currency a material value. This is not the case with Bitcoin, and critics believe that the price is dictated solely by supply and demand.

However, the technology that cryptocurrencies rely on has made other digital assets possible. One of the most interesting examples in recent years is the marking of gold bars. Now traders have the opportunity to trade gold tokens in the same way as any other cryptocurrency.

But the most interesting thing about this is that this tokenization of gold contributed to the development of the cryptocurrency market. Gold has long been an important tool in the financial market, and investors have the opportunity to trade it through exchange-traded funds linked to gold.

Now the cryptocurrency market usingand a structure characteristic of "gold" ETFs, can offer investors new trading instruments, called cryptocurrencies backed by gold.

It is quite natural that the popularity of the latter is steadily growing, and even many critics of cryptocurrencies have paid attention to them. Those who argue that the rapid growth of quotes in this market is not backed by material value lose their main argument, since gold-backed cryptocurrencies such as GoldMint, ZenGold and OneGram have such value.

For example, in the case of OneGram, each token is backed by one gram of gold, which is stored in a vault located in the duty-free zone of Dubai Airport. The same scheme is applied in ZenGold, and GoldMint, based on a private blockchain, issues tokens backed by physical gold or exchange-traded funds at the current market value of this metal.

The advent of gold-backed cryptocurrencies means that these trading instruments are gaining material value. And this fact can push even critics to.

Conclusion

Theoretically, the price of gold and all digital currencies depends on the value of various national currencies. But in practice, the main basis for valuation is the US dollar. The price of gold and cryptocurrencies, expressed in a certain fiat currency, depends on the strength (value) of this currency. Therefore, many experts consider gold and cryptocurrencies as two parallel instruments in which you can either invest or trade them.

However, now, with the advent of gold-backed cryptocurrencies, the situation is changing. Both opportunities are combined in one unique tool that will suit both gold and crypto enthusiasts.

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