Coming Up: Gold and the Bitcoin craze, but first our Markets:
As expected the price of Gold continues to be range bound between $ 1250 and $ 1270 as we approach the holiday week. The Wall Street traders I spoke with this morning have indicated that they have flattened out their books and are getting ready for the New Year after the Christmas break.
Commercial grade silver bars still seem to be plentiful as indicated on how many firms couldn’t find a home for their bars in December and resorted to issuing them to the street via the CME Exchange.
The Palladium / Platinum arb. the traders were involved in has come in a bit and I‘m told most have taken their profits and will reevaluate this trade after the New Year.
Republicans call the new tax bill a Christmas miracle and the Democrats call the bill a scam. One thing is for sure, corporate America is pleased and the wealthy seem happy, too. I guess it depends where you live if you will receive a $ 40 a week increase in your pay or pay up to $ 80 more a week in taxes.
The tax bill could reduce federal revenues by hundreds of millions of dollars. Only time will tell if this bill will spur growth and create new jobs or just add to the countries growing deficit.
Most CEOs interviewed said they will reinvest the dollars saved. But the question remains if they will
invest in new employees or spend the money on new technology eliminating their costs of benefits and other perks to their employees. I’d bet most would take the technology route.
Bitcoin is no threat to the price of Gold
Since the inception of Bitcoin, many have compared the Cryptocurrency to Gold, but in reality there is really no comparison.
First, let’s look at Bitcoin. According to many news agencies 40 percent of all the Bitcoins are owned by 1000 people. That one point gives the Cryptocurrency a back seat to Gold.
It’s thought that tens of millions of people around the world hold some physical Gold.
In an early 2017 survey conducted by the Los Angeles Times, Gold still ranks as the third best perceived long-term investment behind Real Estate and Stocks / Mutual Funds.
The average age of an investor owning Bitcoin is 29 and the average physical Gold investor is 48.
The average Bitcoin investor is in it for the short term while the average Gold investor is in it for the long term.
Now Bitcoin is recognized by two exchanges, the CBOE and the CME. How the Gold contract differs from the Bitcoin contract is that Bitcoin is a cash-settled contract, meaning upon delivery date (or as some call it first notice day) you don’t have the ability to deliver against your short position as you can with Gold. You just have to flatten out your position and take your profit or loss on the trade. In my opinion, that fact confirms that Bitcoin has no intrinsic value, because if it did you would have the ability to deliver your Bitcoins to the exchange.
Some will argue that Bitcoin has value, but one can argue that the value of something that really is “intangible,” has no value at all, except a value based on the investor’s opinion that its worth something, so they are willing to pay some amount of money for the so-called product. (You might have to read my last statement twice.) My college Philosophy professor would have a field day with that last comment.
I’m not alone thinking that Bitcoin is not stealing any business from the Gold market. Goldman Sachs says commentators equating Bitcoin to “Digital Gold” that’s swiping demand from the actual yellow metal are simply wrong. The investment bank, in a Dec. 11th note to clients led by Jeffrey Currie and Michael Hunds, said many investors have been asking if the cryptocurrency is taking demand away from Gold. “We believe the answer is no,” they wrote.
It’s my belief that the price of Gold is exactly where it needs to be accounting for all the economic
figures including the value of the U.S. Dollar, Bond prices and currency valuations.
For those old enough I’ll call the Bitcoin craze, “The Cabbage Kids” investment of 2017.
Does anyone still have an unopened box? My granddaughter asked Grandpa if I can find her one.
Have a wonderful Wednesday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.