Costco's Gold Sell-Out: A Glance at Gold Versus Bitcoin Amid Economic Uncertainty
Summary:
This news article highlights how investors are viewing gold and Bitcoin amidst rising inflation and economic uncertainty. It mentions that Costco quickly sold out gold bars, underlining the continued trust in gold as a safe-haven asset. However, Bitcoin’s significant gains and lower equivalent inflation rate make it an enticing alternative. The increasing price of gold and potential for new discoveries add to market dynamics. It concludes that both gold and Bitcoin could continue to benefit from the Federal Reserve's financial policies and economic uncertainty.
Costco's quick depletion of gold bars has been making news this week. With uncertain economic conditions and escalating inflation, it's understandable why investors see safety in traditional resources like gold. What remains up in the air, however, is whether gold will surpass its last peak of $2,050, reached in May, driven by its recent performance. Over the past year, a noticeable 12% incline in gold rates has been observed, fuelled in part by the Federal Reserve's inflation-restricting strategies that involve higher interest rates, which favour scarce resources like gold. As laudable as these gains are, it helps to observe gold within a broader context. In the same time period, gold's yields have hardly outpaced the S&P 500's rise of 15.4% and WTI oil's 12% uplift. Bitcoin, on the other hand, has seen a massive surge of 39.5%. Yet, gold's lower volatility of 12% is advantageous for investors trying to safeguard against risks.
One of the leading factors contributing to gold's appeal is its reputation as a dependable source during times of crisis and fears. Being the largest tradable asset globally, worth over $12 trillion, gold is the first choice for investors shifting away from traditional markets, including equity and property. For instance, during the peak of the COVID-19 outbreak, gold barely suffered a 2.2% fall in the 30 days leading up to March 24, 2020. Recent reports from Gold.org show central banks continuing to buy more gold for the second month in a row, adding 55 tons, spearheaded by China, Poland, and Turkey. Russia is said to be planning to amplify its gold reserves by an extra $433 million to safeguard its economy against commodity market fluctuations, particularly in oil and gas sectors.
Dissecting production figures provided by Visual Capitalist specifies around 3,100 tons of gold production in 2022, with Russia and China being responsible for 650 tons of it. Future trends predicted by the World Gold Council suggest that if gold prices persist in climbing, there's a possibility of reaching a new record of 3,300 tons production in 2023.
An essential factor to consider amidst evaluating gold as an investment is the stock-to-flow ratio, pinpointing the rate of commodity production versus the total existing volume. Contrasting with Bitcoin, which underwent three planned halvings, lessening its issuing rate and presenting a stock-to-flow ratio of 59, gold's stock-to-flow has remained steady at approximately 67 for the last 12 years. This indicates that Bitcoin's equivalent inflation rate runs lower than the precious metal.
Bitcoin seems poised to steal gold's thunder as the American government faces a shutdown due to hitting debt limits. This situation drives investors to seek alternative but scarce assets. The possibility of Bitcoin outperforming gold is more substantial due to Bitcoin's market capitalisation currently sitting at $500 billion, which means a small inflow could still cause price jumps. This potential scenario could push central banks to offload their gold reserves for managing expenses, which could increase the appeal of Bitcoin.
The prospect of more gold being discovered adds to the dynamics at play. While gold remains a staple among safe haven assets, Bitcoin's notable growth and diminished equivalent inflation position it strongly for investors exploring other value reserves. However, it's crucial to remember that the present economic uncertainty and Federal Reserve's financial policies will continue being beneficial for both assets.
This piece serves to offer general information, without intending to be taken as legal or investment advice. The views expressed in the article belong solely to the author and may not accurately represent those of Cointelegraph.
Published At
9/29/2023 5:45:00 PM
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