Is gold about to rocket like Bitcoin?

Bitcoin has been shooting up like a rocket for most of 2019. As I write, the price of a single Bitcoin stands close to $12,630, which is quite a reversal considering the cryptocurrency languished near $3,500 in January.

I didn’t see that move coming. After peaking close to $20,000 in at the end of 2017, I guessed Bitcoin would keep grinding down and, perhaps, eventually out. But with a market like Bitcoin, speculation begets speculation. If market participants see the price going up I reckon they tend to jump in and make it go up further. And so it goes, up and up, until there’s no one left with any fire-power to buy.

Will gold shoot up next?

Then they maybe sell to take profits, and others see the price falling and sell also. And so it goes… But when will the next fall in the price start to happen? I’ve no idea. But in my own trading activities, I tend to sell to lock in profits fastest when the rise in price has been fast. To me, the rise in the price of Bitcoin has been very fast this year.

So what next? A speculator friend of mine said to me last week, “have you seen the price of gold lately?” I confessed I hadn’t been watching gold. But I looked recently and, guess what, it’s been going up. Maybe speculators seeing the move will jump in and make it go up further, and on and on. Could gold shoot up in spectacular fashion like Bitcoin has done this year? Maybe.

Gold was at about $1,200 an ounce in September 2018, but it’s trading near $1,400 today, as I write. The shiny stuff could be about to break up from a trading range first established in the middle of 2013.

People used to say that gold is a good hedge in times of economic uncertainty. When stock markets and economies were crashing, sometimes gold would go up, or at least hold its price. But I reckon we’ve been living through extraordinary economic times in recent years, characterised by ultra-low interest rates, quantitative easing and all sorts of weird financial manoeuvrings. Meanwhile, gold’s tight trading range would suggest all’s well in the economic garden. Maybe gold’s relationship with financial fear has broken down.

Building value

But if gold is about to shoot up, perhaps it’s predicting dire economic times ahead. I’m not so sure. I think speculation in today’s digital world is rife and if gold does move up in a big way, it’s likely to be based on nothing at all but speculation itself, just as we are seeing with Bitcoin, in my view.

Well-known American investor and businessman Warren Buffett doesn’t speculate on gold because it doesn’t do anything. “It just sits there and looks at you,” he once said.

He became the third-richest person on the planet by investing in the shares of companies on the stock market and directly into unlisted businesses. Those businesses do something. They build value if we’ve chosen carefully. 

Buffett didn’t need Bitcoin or gold, so I’m going to embrace shares too, whatever the price of gold and Bitcoin do next.