Is Bitcoin Killing Gold?

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Gold investors Peter Schiff, Ron Paul, Chuck Woolery. Photo-Illustration: Intelligence. Photos: Getty Images

If anyone wanted to get rich off inflation, that was supposed to be the goldbugs. Over the past decade or so, these men have warned of the dangers of rising prices to your cost of living and have touted the special virtue of gold for overcoming this threat. When our country used to flex its muscles with battleships like the USS Iowa, the world would listen, said William Devane, a former daytime TV actor, in a bomber jacket on TV. leather and aviators in front of the battleship. turrets. Dangerous forces separate our country, threatening our economy and our way of life. That’s why I’m going to do two things: support our military and buy gold from Rosland Capital. For the goldbug, metal is not just an asset: it is a way of life, almost a religion, a rebellion against the last 50 years of Federal Reserve supremacy in the American markets, a way of showing that when it all crumbles and our dollars are no better than toilet paper, they’ll be the last to laugh.

Now, however, may be the twilight of the goldbugs. On Wednesday, the federal government released its Consumer Price Index for October, showing the highest annual inflation rate in 30 years, with everything from gasoline to food to rent accounting for a larger share. important of every paycheck. Anyone familiar with the logic of bullion ads can reasonably expect the gold market to be hot right now. But this is far from the case, with gold underperforming most of the major assets in US markets. Since the start of the year, it has been more or less flat, while the other raw materials are up sharply for the year:

The price of raw materials has increased over the last year … Gross WTI: + 109% Heating oil: + 106% Gasoline: + 105% Brent crude + 101% Coffee: + 88% Natural gas: + 74% Cotton: + 71% Copper: + 39% Aluminum: + 37% Corn: + 36% Sugar: + 34% Wheat: + 30% Wood: + 15% Soy: + 9% Silver: + 3% Gold: -1%

– Charlie Bilello (@charliebilello) November 10, 2021

While the sheep who invested in the S&P 500 stock index are up 24% year-to-date, the poor souls who invested in a fund managed by prominent gold investor Peter Schiff are down 11 %.

The hit print of 6.2 percent inflation pushed the price of gold just over one percent to $ 1,848 at the end of Wednesday. But an ounce of gold is still worth $ 40 less than in June, when the economy was just starting to heat up, and even more below its peak above $ 2,000 last summer. Goldbugs who imagined this day for years 6% inflation! must have imagined it as a moment to cry victory and marvel at their profits. But the financial reality has not been so simple.

Gold has been the asset of choice for those wary of the US dollar (aka our fiat currency) since August 15, 1971, when President Richard Nixon announced the end of the gold standard, when the value of the dollar was attached to a fixed price. gold, ushering in an era of central bank-led monetary policy. Inflation shocks in the 1970s drove the price of the metal up, cementing its status in the Wall Street playbook and the public imagination as a way to keep wealth from deteriorating when the price of everything rest was increasing.

Devane is simply one of the celebrities of the retired generations who peddle metal. People like Chuck Woolery, the original Wheel of Fortune host, and former Texas Rep and Republican presidential hopeful Ron Paul are pushing merchandise to low-budget locations filled with spooky graphics and alarming imagery of Washington, DC. Fox Business host Stuart Varney appears to be the most gold-friendly news host, or at least the happiest to bring goldbugs to his show. Recently, Paul, whose book End the Fed calls for the abolition of the central bank and the return to the gold standard, took to a YouTube channel to suggest that an obscure cabal of government agencies is taking place. intends to keep gold prices contained in order to avoid a market panic.

Goldbugs weren’t happy this week. On his syndicated radio show, Woolery lamented hyperinflation and the march of socialism. Varney invited a guest to talk about how gold gained ground, even though the chart next to him showed it had risen by less than one percent. (The guest also hinted that gold was too expensive). Paul, for his part, remained silent, preferring to rail against the vaccine warrants on his Twitter account.

What explains this sad state of affairs? The most popular theory in financial circles today is that goldbugs have underestimated the competitive appeal of cryptocurrencies. Bitcoin, prized by libertarians and Occupy Wall Streeters for bypassing government control, has many of the same attributes as gold, but without the need for physical safes, jewelers, or mining operations. There is even a growing division between the new guard crypto investors, who are making their way to wealth, and the goldbugs who seem to be abandoning the investment card.

#HaveFunStayingPoor pic.twitter.com/W4IoKUEEtg

– RD TC (@RD_btc) December 14, 2020

At first glance, bitcoin, barely a decade old, and gold, used since the dawn of civilization, shouldn’t have much in common. But look closely, and there is a large overlap. Like the supply of gold which is limited by the amount of metal that can be mined in any given year, the number of bitcoins in the world is fixed in the currency code, making its scarcity a part of what makes her so precious. This tale of digital scarcity is one of the main reasons bitcoin hit an all-time high above $ 68,000 earlier this week. It’s also just a hot investment that has captured the ineffable momentum in the markets. A reason [gold has lagged] is that many investors are interested in an alternative to gold and see that alternative to be cryptocurrency, Duke University professor Campbell Harvey, who wrote about the tenuous relationship between gold and short-term inflation. Another possibility is that the price of gold, in my calculation, is actually quite expensive and unattractive, given its history.

Goldbugs now appear to be stuck with a bad hand, making arguments full of contradictions without a clear thesis. Juan Carlos Artigas, head of research at the World Gold Council, told me that there is still room for the metal to rise in value, but also that the effects of inflation are taken into account, which which means they were expected. He told me that gold is a hedge if the economy turns and can become more valuable when consumption picks up. But now that inflation is here, goldbugs don’t really have to worry about the price going up or down, not when there are still sponsorship deals to be made for daytime TV commercials. These gold coins are just not going to sell.

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