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Recently, the prices of both real gold and "digital gold" Bitcoin have been continuously surging.
Overnight, as the U.S. bond yields and the U.S. dollar index weakened, gold rose for five consecutive days, reaching a new closing high of $2,128 per ounce on March 5th. Meanwhile, Bitcoin continued its almost frenzied momentum, driven by the popularity of the newly listed Bitcoin ETF, with record inflows into the spot Bitcoin ETF, pushing the price to record highs. The total assets of the 10 U.S. spot Bitcoin ETFs in the market surged to nearly $50 billion.
As of 6:30 PM on March 6th, the spot gold was quoted at $2,126.7 per ounce, with a year-on-year increase of 15%, which is remarkable given the backdrop of the Federal Reserve's interest rate hikes. One Bitcoin was priced at $66,667.3, with a staggering year-on-year increase of nearly 200%. While both have their reasons for the surge, experts believe that they are closely related to the market's demand for safe-haven assets, and the expectation of a Federal Reserve interest rate cut continues to support both. How much potential do gold and Bitcoin still have in the future? Currently, traders interviewed believe that the direction with the least resistance is still upward.
Gold still has upward momentum
Gold spot prices surpassed the historical high and touched $2,135 per ounce on December 4, 2023, but quickly pulled back. The upward trend in gold prices resumed in 2024, and as of March 5, gold has risen for five consecutive days, closing at a new high.
"Although gold is currently approaching the nominal historical high, the inflation-adjusted gold price is far below the peak of $3,355 per ounce in 1980, and also below the second-highest points in 2011 and 2020. Considering the prospect of the Fed's interest rate cut this year and the strong demand from central banks around the world, the gold price may still have upward potential, but it is also necessary to pay attention to the possibility of short-term profit-taking." Jerry Chen, a senior analyst at GAIN Capital, told reporters.
Currently, factors such as hedging inflation and geopolitical risks, betting on the Federal Reserve's interest rate cut, and central banks around the world increasing their holdings have led to a sharp increase in gold long positions. Last Thursday (February 29), the released U.S. inflation data recorded the lowest growth rate in nearly three years, but the MoM growth of core PCE reached 0.4%, setting a new one-year high, and the February ISM manufacturing PMI was significantly lower than market expectations. After a series of data releases, the market's expectation of an interest rate cut has not changed significantly, still expecting a cut of around 80 basis points for the whole year, possibly as early as June, which is almost consistent with the Fed's previous forecast. For gold, a non-interest-bearing asset, the expectation of an interest rate cut will boost its relative value.
The rise in the price of gold in Mainland China far exceeds the international gold price. Over the past year, the domestic gold price has soared nearly 20%, and the total demand for gold jewelry in Mainland China reached 630 tons, a YoY increase of 10%, with a consumption amount of 282 billion yuan, reaching a historical high. Wang Lixin, CEO of the China region of the World Gold Council, recently told reporters that the total holdings of gold ETFs in Mainland China increased by 20% in the whole year of 2023, and the total asset management scale denominated in RMB soared by 34%, thanks to the sharp rise in domestic gold prices, and its scale is expected to further increase. In contrast, global gold ETF holdings totaled a decrease of 244 tons, continuing to decline for three consecutive years.
In addition to the enthusiasm of investors and consumers for buying gold, central banks are also increasing their efforts. In the fourth quarter of 2023, the central bank of Mainland China increased its gold reserves by 44 tons, with a total annual purchase volume of 225 tons. As of 2023, the official gold reserves of Mainland China have reached 2,235 tons, accounting for 4.3% of the total reserve assets, and the central bank of Mainland China is still in a continuous gold-buying trend.
Jerry Chen told reporters: "In the short term, traders need to closely monitor the short-term support levels of gold, including the region around $2,120 per ounce. If it breaks below, a sudden drop in the gold price may be seen. If it falls below $2,110, it may quickly fall back to the key long-term support area of $2,075 to $2,088." However, he also mentioned that if the December 2023 high of $2,146 is broken, the path with the least resistance is obviously upward, but due to the large short-term increase in the gold price, a short-term adjustment is also
normal.
Currently, the market is focusing on the speech of Federal Reserve Chairman Powell at the congressional hearing on Wednesday night, expecting him to echo the recent views of other Fed members, that is, "not eager to raise interest rates." At present, the market speculates that the first interest rate cut may be in June, and cautious comments will test the bullishness of gold and U.S. stocks.
Record inflows into Bitcoin ETFs
Bitcoin, known as "digital gold," has been dominating the market recently, with its rise far exceeding that of "real gold." In addition to its safe-haven function, Bitcoin has shown characteristics of a risk asset most of the time, along with the continuous rise of the U.S. stock market.
Bitcoin ETFs are highly sought after. Since these funds were launched on January 11 this year, investors have poured in at a record pace, pushing the total assets of the 10 U.S. spot Bitcoin ETFs in the market to nearly $50 billion. It is reported that BlackRock's iShares Bitcoin Trust fund's assets broke through $10 billion last Thursday, becoming the fastest ETF to reach this milestone in history; Fidelity's similar fund currently has assets exceeding $6 billion and is already the third-largest ETF of the asset management company, accounting for most of its ETF net inflows this year.
Due to the convenience of ETF investment, investors have expected that the launch of ETFs will drive a new wave of Bitcoin rally, just like when Bitcoin futures were launched. These ETF funds allow retail investors to buy digital assets through brokerage accounts without having to go to cryptocurrency exchanges or track Bitcoin prices through futures contracts.
Some traders also commented: "The Bitcoin market will mock traditional technical analysis terms, such as 'overbought' and 'oversold.' The speed of its rise is so fast that you can hardly take your eyes off it. Bitcoin rose by about 42% in February, and it is clearly still in the relatively early stage of its parabolic trend. If this means that Bitcoin has just started to heat up, it is difficult to estimate how high it can rise."
However, with Bitcoin rising rapidly, how much momentum is left in this upward trend? Matt Simpson, a senior analyst at StoneX, mentioned to reporters, "Pay attention to the $60,000 to $70,000 range, which prompted it to sharply reverse from the historical high and enter a bearish trend. As the price is now close to last month's closing high, it indicates that the market is focusing on these key points. In his view, the rise of Bitcoin since the low point in 2022 is accelerating. Bitcoin ushered in its largest monthly increase since December 2020 in February this year, and that month was still in the relatively early stage of its parabolic trend. If this means that Bitcoin has just started to heat up, it is difficult to estimate how high it can rise.
Some institutions believe that after experiencing this stage of skyrocketing, the unilateral trend may have ended, and Bitcoin is about to enter a phase of two-way fluctuation. |
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Post time 15-3-2024 21:50:40