Gold Spot Price vs Bitcoin Price
Last week, the gold spot price paled in comparison to the price of Bitcoin. The main factor that contributed to Bitcoin’s historic rise was that investors no longer trust political leaders with their monetary and fiscal policies. Owing to the US government’s continuous printing of fiat currency, investors and institutions began to pour resources into Bitcoin. Although there is clearly high demand for safe havens in light of rising inflation concerns, last week it appeared that investors forgot about gold.
Bitcoin broke all-time-high after all-time-high records. Despite this monumental occurrence, there is analytical support for the gold spot price to rise this week. However, it can also rise through the year even though Bitcoin appears to be at the forefront of investors’ minds. Standard Chartered, MKS, Capital Economics, and others have immense optimism for the gold price in 2021. These financial sources, and many others, show immense optimism for the gold price to rise in 2021. Those bullish on gold believe the price will reach $2,000 per oz and higher consistently in 2021. Here’s why.
Capitol Insurrection & Biden’s Inauguration
Almost two weeks ago, a pro-Trump rally turned violent at the US Capitol as rioters muscled their way inside. While an attempt was made to disrupt the official certification of the 2020 election, this insurrection did not prevent the Senate and Congress from authorizing President-elect Biden’s win.
As a result, all eyes are on the inauguration of President-elect Biden and Vice President-elect Kamala Harris. Washington, DC has remained in a state of emergency since the insurrection. Consequently, bridges have been closed to cut off additional access points to the city. On top of that, public transportation will be severely limited through the inauguration. Law enforcement is checking vehicles, blocking certain roads, and shut down the National Mall. Additionally, the National Guard and Coast Guard remain in the city to defend any and all violent attempts to interrupt the peaceful passage of power to President-Elect Biden and Vice President-elect Kamala Harris.
This uncertainty of the US socio-political situation could prove bullish for the gold spot price, depending on how events play out. On top of that, new economic policies could push the gold spot price higher or lower, depending on what policies are passed. As for the inauguration today, the gold spot price starts off strong, rising $22 at the NY open.
Yellen and The Gold Spot Price
Along with Biden’s election enters Treasury Secretary nominee Janet Yellen. If confirmed by the Senate, the former chair of the Federal Reserve would be the first woman to hold this position.
When asked on Tuesday about the US dollar and the market-determined exchange rate, Yellen responded:
“[The] US does not seek a weaker currency to gain competitive advantage, and we should oppose attempts by other countries to do so.”
Yellen also maintains that if the government does nothing to help its citizens, then there will be “a more painful recession now” and “long-term scarring of the economy later.” Yellen also added that the smartest thing the US can do is “act big” thus confirming her support for Biden’s new stimulus plan. This news helped the gold spot price retain its daily gains on Tuesday.
What Does Biden’s Stimulus Proposal Mean for the Gold Spot Price?
As a result of this election, the gold spot price remains in a tug-of-war position. People expect an economic boom when the hospitality and entertainment industries can fully re-open. However, Biden’s massive economic relief plan adds inflationary pressure to the dollar. This currently causes mixed feelings in the gold market.
Many speculate that Biden’s proposal could actually lead to stronger economic growth later in the year. Capital Economics, for one, expects that in addition to the vaccine, fiscal stimulus could actually boost US economic growth up by 6.5% this year.
Also, even if only portions of Biden’s proposal gain approval, the increase in stimulus support is may be positive in the long-term for gold. Bart Melek, head of commodity research at TD Securities, predicts that the gold price might fall in the short term. However, he also believes the gold spot price will eventually push above $2,000 per oz simply because of inflation and subsequent concerns.
“We are going to see real yields go up as the economy improves but I think that is when the Federal Reserve will step in. The Federal Reserve can’t afford to get interest rates go higher. I think the fears of tightening interest rates are unfounded at this point.”
Therefore, his analysis concludes that while the US dollar might strengthen with higher interest rates and the global economy will improve. He also maintains that investors might move away from fiat currencies to embrace “higher yielding emerging market currencies.”
What Are Analysts Saying About the Gold Price in 2021?
Further support for rising gold prices comes from MKS, the European precious metals firm. It believes that gold prices will push to $2,300 this year. The firm also predicted the gold spot price will average $2,072 per oz in 2021. MKS is similarly bullish on silver and expects that it will rise to $40 per oz this year, with an average of $32.50.
MKS arrived at this conclusion because gold and silver trade so closely together, and therefore silver cannot help but rise alongside the metal. Furthermore, the European firm also indicated that a reopening economy would mean higher industrial demand for silver. Higher demand will likely drive the price up. Biden’s pro-science agenda will also drive up the demand for industrial silver, and potentially platinum group metals as they have high industrial applications that support green energy.
Also, Suki Cooper, a precious metals analyst from Standard Chartered said on Friday:
“We maintain a positive view on gold; expect prices to retest the USD 2,000/oz threshold and reach new highs. We believe the bulk of gold gains are likely to materialize in the first half of the year.”
Cooper further supported a bullish gold trend with projections that it will reach $1,930 in Q1 and $2,075 in Q2. These predictions are founded on the assumption that investors will return to safe havens after experiencing a multitude of factors. These may include a weaker US dollar, real yields remaining negative, Biden’s stimulus plan and any other similar programs, as well as rising inflation expectations.
The inauguration of President-Elect Biden will take place on 1/20/21. Only time will tell how his economic plans will impact the gold spot price and the stock market.
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