Tips for traders, 6 August 2020
Gold finally breaches $2,000
This narrative has been around since 2011, when people expected the price of gold to go up to $2,000. As it happened, though, gold even went down to $1,089 per troy ounce. With current economic problems, more and more people are moving into gold amid fear of economic conditions and to ensure that they can preserve the value of their money given the stimulus from most central banks worldwide.
In the past quarter, the price of gold has risen by 20% and 30% year to date. This has shown that the weakening of currencies is real, while there is the expectation that the price of gold will strengthen as it is still considered a safe haven that can hedge inflation.
BTC reaches $12,000
With the flood of liquidity everywhere in the world, bitcoin finally got a small splash and the price rose. The problems with BTC are the limited depth of the market and the trust of participants is not as high as gold. Even limited inflows of capital have caused fairly big gains for bitcoin, though.
Bitcoin has been comparatively stable this year relative to the norm. That said, we’ve seen bitcoin move from $10,000 down to $3,800 then back above $10,000. The months after the initial crash witnessed the period of highest stability around $8,500-$10,000. The narrative earlier this year was mainly about halving, but this has had little direct impact on the price.
Since the price of gold has been very high, managing risk is particularly important. Selling pressure remains high as people are more cautious about the current price of gold. At the same time, if stimulus remains high, further extension seems likely.
For bitcoin, since the price is in its resistance area, there might be a retracement before continuation upward. More gains seem possible at some point because bitcoin has not tested its all-time high. Managing risk in this situation is particularly important because price has appreciated considerably.