Investment bank analysts have been lining up to talk about bitcoin.
Credit Suisse CEO Tidjane Thiam just did his best to calm overexuberance. “From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,” Thiam warns.
Such speculation has “rarely led to a happy end” in the markets, he reminds us.
Jeffrey Currie, the global head of commodities research at Goldman Sachs, agrees. “In our view, bitcoin is attracting more speculative inflows relative to gold,” Currie says.
Currie draws a clear distinction between the bitcoin buyer and the gold investor. In his view, bitcoin appeals most to day traders and speculators with its lack of liquidity and high volatility. Gold, however, is for long-term investors who are seeking safe haven assets that can add stability to their portfolios, Currie said.
Neil Wilson, a senior market analyst at London-based ETX Capital, also thinks bitcoin is in a speculative bubble driven by people betting blindly that it can keep rising.
“Gold remains the safe haven of choice for investors,” Wilson says. “Bitcoin would have to become considerably less volatile and, as such, a far better store of value for it to affect interest in gold.”
“[Bitcoin] is also open to fraud and hacking, which makes it less than secure,” Wilson continues. “Most investors don’t particularly want a decentralised, unregulated network to be their safe haven. They want something tangible and understood and that is gold,” he says.
This fall, Goldman Sachs reiterated its recommendation that retirement investors consider gold. In their words, gold remains a “highly relevant asset class” in modern portfolios because of its durability and intrinsic value. The famed investment bank has also reminded investors several times this year that gold can perform well in periods of economic or geopolitical uncertainty.
Today’s conditions are the very definition of uncertainty…
ANALYSTS BULLISH ON GOLD IN 2018
Fed monetary policy, U.S. dollar strength and geopolitical uncertainty will likely be overriding factors determining where gold prices go in 2018.
TD Securities’ 2018 outlook predicts the U.S. dollar will weaken, a trend that has historically helped boost precious metals prices. The bank reports that the expectations the Fed will start approaching the end of its tightening cycle just as other central banks consider unwinding their super loose policy could lead to weakness for the U.S. dollar in 2018. TDS expects gold to average around $1,313 an ounce in 2018, with an average of $1,300 in each of the first two quarters of the year and $1,325 in the last two.
Commerzbank thinks gold will average $1,325 an ounce in 2018, while Bank of America Merrill Lynch forecasts $1,326. Commerzbank notes the main contributory factor behind their bullish outlook for bullion remains the extremely loose monetary policy pursued by nearly all key central banks, resulting in ongoing very low to negative interest rates. The bank also says that political uncertainty is also likely to be a constant feature throughout 2018.
Indosuez Wealth Management global head of foreign exchange and precious metals Davis Hall thinks the ongoing unpredictability of Trump’s policies, coupled by the ever simmering geopolitical uncertainty in the Korean peninsula are adding strength to gold. Saxo Bank head of commodity strategy Ole Hansen expects geo-risks both political and military to remain elevated in 2018, meaning investors are likely to maintain and potentially increase demand for safe-haven assets such as gold and silver.
YOU DON’T NEED TO BE A WEATHER FORECASTER TO SEE STORMS AHEAD
In a television interview this week, Juan Carlos Artigas, Director of Investment Research at the World Gold Council, reminded investors that gold can be a strategic asset that can help weather storms in the markets. “If you wait until the last minute to protect your portfolio from that correction, you may actually miss it,” he said.
Investors are buying gold because it provides market diversification, protects their privacy, is a physical asset and is inexpensive to store.
When the next big Wall Street bank collapses or the impending tax reform bill blows a hole in the U.S. national debt, causing a loss of confidence in the U.S dollar, you will be glad you own gold coins and bars in your safe or your Gold IRA.