Gold, Cryptocurrencies and the US Dollar
The recent surge in gold and cryptocurrencies is a clear indication that fiat currencies are in trouble. Gold is up, cryptocurrencies and the dollar are down and experts predict this trend to be exacerbated.
Gold has risen to a 4-month peak.
Spot gold was up 0.95 percent at $1,353.80 per ounce at 12:02 p.m. EST, while U.S. gold futures for February delivery climbed 1.23 percent to $1,353.20 per ounce.
US Dollar –
Clearly, the US Dollar is under attack from many areas: uncertainty, inflation, trade wars, movement by countries away from dollar denominated financial system and even from the Trump administration. Irrespective of the reason, when the dollar falls one outcome is that gold rises.
The Evidence –
- The weakening U.S. dollar is creating uncertainty. This uncertainty is leading investors to look for a hedge and protection. The US Government has indicated it will continue efforts to weaken the dollar.
- U.S. Treasury Secretary Steven Mnuchin stated:
“a softer dollar was good for the United States. Meanwhile the dollar index shows three-year lows.”
potential trade wars and inflation
The potential of a weaker dollar is futher exacerbated by potiential inflation and trade wars. The markets including China sees these as reasons to invest in gold as a hedge.
- “Global investors are also concerned about potential trade wars… which is stirring up some risk-aversion trade, so that, in turn, is supporting gold,” said Richard Xu, a fund manager at China’s biggest gold exchange-traded fund,
- HuaAn Gold. “I think gold prices will continue to trend higher along with other commodities, so $1,400 (an ounce) is our near-term target.”
Bitcoin may be a bubble however, the technology may revolutionize the world financial system
- Since early 2017, Bitcoin has risen in price from less than $1,000 to nearly $20,000. Crypto is an alternative, enticing way of opting out of our current banking and money system.
The sauce behind Bitcoin
This site as have a few investors and advisor like Mike Maloney have researched the technology behind cryptocurrency.
The result of this research is we all see that this technology could very well be an alternative to current systems such as central banks and government controlled systems.
The appeal to crypto currencies is rooted in the loss of confidence in fiat Government issued currencies. The loss in trust with the world banking system.
- What is misunderstood or unknown is that what is behind the curtain and the appeal to cryptocurrencies, i.e., “Digital Ledger Technology”.
Bitcoin History and argument for new system:
Bitcoin is the first digitalized, decentralized, non-government issued currency. A White paper published in 2008 detailed an alternative, new form of currency (Bitcoin).
The paper white paper published under the alias of Satoshi Nakamoto. This publisher could have been and individual or group of people, but the paper outlined the Digital Ledger technology and Bitcoin form of currency.
The thesis of this paper was to address commerce’s reliance on financial institutions to process payments.
Purcahse Bitcoin Safe and Secure from ==>Regal Assets
electronic payments and settlements by banking system
Clearly nearly, 100% of all payments are now electronic then by extension financial institutions process nearly 100% of all transactions.
This done when financial institutions act as intermediary for both the merchant and buyer in a confidence and trust relationship.
Currently there is a loss of confidence and trust in fiat currencies and financial systems.
Let me begin by recalling the admitted actions of Wells Fargo Bank. Wells Fargo created millions of new fake accounts then charged fees to unknowing customers. This of course, is only one example of many such fraudulent and untrustworthy actions by our banking system. So it easy to see why people have lost confidence in the system.
The real reason that cryptocurrency may survive
Behind Bitcoin is and electronic payment system based on cryptographic proof. (Digital Ledger Technology) This technology eliminates the need use or trust a financial institution.
Nakamoto, digital ledger technology and bitcoin
Cryptocurrencies are a method to complete transaction between any two parties directly via the internet.
“Nakamoto introduced and described the concept by writing: A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power.” (Source: Gold Silver)
To read the white go here: è Satoshi Nakamoto published a whitepaper detailing a new form of currency
But — To Have Value Somebody has to buy your Bitcoin
- Bitcoin just saw huge declines.
- Is it the beginning of a bear market? No body knows however, when viewed through a historical lens when you see a dramatic rise as in bitcoin then there is a huge correction, i.e., downturn. Further,
- Bitcoin has no support or historical appeal or value other then what speculators have placed on it. So when people stop buying at higher price what will happen?
Gold As an Alternative to the Dollar
- So if you agree with the argument that people have lost confidence and do not want to deal with banks and government; is gold a viable alternative? Simply put, “Yes”;
- Gold has over five thousand (5,000) years of acceptance and value. As we have often discussed on this site there have been times when gold, was used as money; Nevertheless, even when it was not, in any historical period, it had value and was exchangeable into currencies;
- Gold can help provide you a safe haven against a falling dollar;
- Commodities, including gold, have rallied and threatened the 200 level for the first time since 2015;
- Hence, we suggest that gold appears to be a great bet if you desire to position ahead of this weak, falling dollar.
US Dollar has seen loss of Confidence and is Falling
After the first three weeks of 2018 the US dollar has fallen. Most experts, including this site have made the argument this downward trend will continue through 2018;
The following chart shows how the dollar had topped and fallen in early 2018. The Dollar Index has continually fallen since 2017 when it was near 104 to where it is now, near 91.