The week started with a Bloomberg article covering on the Goldman Sachs Group Inc report highlighting “real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge”. I included a quick chart of DXY, which is a US Dollar Index relative to the basket of global currencies. We can see a general trend starting from 1986 progressing in waves downwards. The downward movement on the chart indicates that US Dollar is getting weaker comparing to the other world’s currencies.
At the same time of the dollar decline we also saw a raise in Gold and Silver commodities. Gold broke the all time high resistance and now positioned to continue the trend started back in 2001. I will not be surprised by the price of gold reaching $2,500 per troy oz.
FOMC and Bitcoin
Also, this week Federal Open Market Committee (FOMC) released a statement keeping the federal funds rate at or near 0%. There seems to be no end in sight for the liquidity injections, credit swap lines, and more stimulus.
Financial institutions are noticing these trends and diversifying into inflation-proof assets like Gold, Silver, and Bitcoin. The latter is evidenced by the record inflows to Grayscale fund which invests exclusively in Cryptocurrencies. With $5.1 billion under management Grayscale saw record inflows of capital from accredited investors and institutions.
The demand for digital assets is evidenced by the recent price action of Bitcoin. Bitcoin was able to break through the multi-year resistance and continued upwards momentum to challenge last year’s high of $13,853.
What’s a better investment: Gold, Stocks, or Bitcoin?
The question of the week is: given all these developments, would it be better to invest in Gold, Stocks, or Bitcoin? I attempted to chart the answers to this question.
This is a chart of Gold to Bitcoin/USD. It shows a historical trend of Bitcoin trading within an ascending wedge pattern, which is bearish, until the breakout to the downside. A downside breakout on this chart would indicate that Bitcoin would be a more profitable investment than gold for the duration of the downward movement.
Finally, I created a chart of S&P500 index (SPX) and Bitcoin/USD pair. It shows a historical trend of Bitcoin investing as it compares to investing in the S&P 500 index. We can see it is trending downwards within a clear channel. Further follow of this channel downwards would indicate that investing your US dollars into Bitcoin would be more profitable than investing into the S&P500 index.
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As usual, none my articles or charts here constitute a financial advice. You and only you are responsible for your financial decisions.