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Cryptourrency Crash Sparks Bitcoin’s Nouveau Riche To Run To Gold - Bloomberg

Cryptourrency Crash Sparks Bitcoin’s Nouveau Riche To Run To Gold - Bloomberg

Release Date:  Friday, January 19, 2018

Gold prices finished lower this week as “traders grew wary after the precious metal’s rise to multi-month highs despite an overall rise in Treasury yields and a climb in key U.S. benchmark stock indexes to record levels…

‘“Gold is due a correction after its $100 rally’ since the Federal Reserve lifted a key U.S. interest rate in mid-December, said Mark O’Byrne, research director at GoldCore. ‘A near 8% gain in a month is quite a move up in a short period of time and ordinarily one would expect a correction.’” (“Gold suffers biggest one-day decline in more than a month.” Market Watch 01.18.18)

Cryptourrency Crash Sparks Bitcoin’s Nouveau Riche To Run To Gold -  Bloomberg
“Amid the wild Bitcoin ride that’s wiped more than 40 percent off the cryptocurrency’s price in a month, a pattern may be emerging: sellers are switching out of digital gold and into the real thing.

“Bullion dealer Sharps Pixley, a subsidiary of Europe’s largest precious metal coin and bar outlet, regularly sees trades north of a million pounds, while sales of gold coins at Frankfurt-based CoinInvest jumped fivefold as the largest digital asset collapsed after surging 1,400 percent last year, according to Director Daniel Marburger.

“’Yesterday was a hell of a crazy day,’ he said from Frankfurt. ‘Emails and phones did not stand still with customers asking how they could turn their crypto into gold.’

“The current price swings across seemingly every cryptocurrency are bringing to the fore a question that has loomed over the industry since its inception: to what extent can a virtual asset be a store of value? By swapping out of digital gold and into the real thing, some investors may be providing an answer.

“Ross Norman, a gold dealer with a store tucked in a corner of London frequented by the upper classes, started exchanging gold for bitcoin via an intermediary three months ago. He describes his customers as almost embarrassed by their new-found fortunes. They often store it in safety deposit boxes in his underground vault, following extensive due-diligence to prevent money laundering.

“’Bitcoin is a bit of a lobster pot -- it’s easy to get in, but hard to get out,’ Norman said. ‘Gold also offers investors 4,000 years of history as a store of value, and that’s looking quite appealing right now.’

“Lack of demand hasn’t proved much of a headwind to gold prices in recent weeks. The yellow metal, supported by a falling dollar, rallied 7.5 percent in the past month to a four-month high before tempering gains. Bitcoin fluctuated on Wednesday, but was about 44 percent lower than its peak in December.” (“Cryptocurrency Crash Sparks Bitcoin’s Nouveau Riche to Run to Gold.” Bloomberg 01.17.18)

Billionaire Sam Zell Sees ‘Irrational Exuberance' In The Stock Market And Holds Mostly Cash - CNBC
Sam Zell argues that the seemingly unstoppable stock market rally is based on emotion not fundamentals.

"’I think the current situation seems like irrational exuberance,’ said the founder and chairman of the property specialist firm Equity Group Investments. Referring to ‘irrational exuberance,’ he was echoing a warning that then-Federal Reserve Chairman Alan Greenspan famously issued in 1996 about the market environment.

“Zell said on ‘Squawk Box’ that tech stocks and other highflyers, which have been largely responsible for the rally, belie the rather tepid returns from ‘average companies.’

“All assets, including stocks and property values, are too expensive, Zell said, adding he's mostly in cash. On the real estate side, he said he's been ‘selling stuff.’ With a dearth of investment opportunities, he argued, the burden of holding cash is not as great as it would be otherwise.

“Despite his rather pessimistic comments, Zell said he does see a path to increased economic growth due to the tax reform and deregulation policies of President Donald Trump.

"’I think the opportunity for the country to grow at 3 percent is real,’ but whether that happens remains to be seen, said Zell, who has described himself as socially liberal and fiscally conservative.” (“Billionaire Sam Zell sees ‘irrational exuberance’ in the stock market and holds mostly cash.” CNBC 01.16.18)

Plunging U.S. Dollar Has Gold Investors Feeling Great - TheStreet
“Gold and silver market bulls are sitting comfortable at present, amid their positive near-term technical postures, the depreciating U.S. dollar, and some worries about the U.S. government shutting down late this week due to budget disagreements among Republicans and Democrats.

“A massive sell-off in the crypto currency market-namely bitcoin-did not hurt the gold and silver market bulls any today, either.

“The other key outside markets on Wednesday saw Nymex crude oil prices firmer. Prices are near the three-year high of $64.89 a barrel, set on Tuesday. The oil bulls are technically strong to suggest still more gains in the near term. Such is also bullish for the precious metals markets.

Something strange is going on in the financial system. And according to The Wall Street Journal, it's causing some investors to move massive amounts of money out of the banking system.” (“Plunging U.S. Dollar Has Gold Investors Feeling Great.” TheStreet 01.17.18)

China Downgrades US Credit Rating From A- to BBB+, Warns US Insolvency Would “Detonate Next Crisis - ZeroHedge
“In its latest reminder that China is a (for now) happy holder of some $1.2 trillion in US Treasurys, Chinese credit rating agency Dagong downgraded US sovereign ratings from A- to BBB+ overnight, citing ‘deficiencies in US political ecology’ and tax cuts that ‘directly reduce the federal government's sources of debt repayment’ weakening the base of the government's debt repayment.

“Oh, and just to make sure the message is heard loud and clear, the ratings, which are now level with those of Peru, Colombia and Turkmenistan on the Beijing-based agency’s scale of creditworthiness, have also been put on a negative outlook.

“In a statement on Tuesday, Dagong warned that the United States’ increasing reliance on debt to drive development would erode its solvency. Quoted by Reuters, Dagong made specific reference to President Donald Trump’s tax package, which is estimated to add $1.4 trillion over a decade to the $20 trillion national debt burden.

“’Deficiencies in the current U.S. political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,’ Dagong said adding that ‘Massive tax cuts directly reduce the federal government’s sources of debt repayment, therefore further weaken the base of government’s debt repayment.’

“Projecting US funding needs in the coming years, Dagong said a deterioration in the government’s fiscal revenue-to-debt ratio to 12.1% in 2022 from 14.9% and 14.2% in 2018 and 2019, respectively, would demand frequent increases in the government’s debt ceiling.

“In a preemptive shot across the bow in the coming trade wars, last week Bloomberg reported that Beijing officials reviewing China’s vast foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds. That warning spooked investors worried that sharp swings in China’s massive holdings of U.S. Treasuries would trigger a selloff in bond and equity markets globally. The report sent U.S. Treasury yields to 10-month highs and the dollar lower, although China’s foreign exchange regulator has since dismissed the report as ‘fake news.’

“To be sure, China's move is far more political than objectively economic, and is meant to send another shot across the bow as the Trump administration prepares to launch a trade war with Beijing in the coming weeks. Still, while both Fitch and Moody’s give the United States their top AAA ratings (and the S&P is the only agency to infamously downgrade the US to AA+ in 2011), US raters have also expressed concerns similar to Dagong‘s…

“S&P Global said last month’s proposed U.S. tax cuts would increase the federal deficit and looser fiscal policy could prompt negative action on U.S. credit ratings if Washington failed to address long-term fiscal issues.” (“China Downgrades US Credit Rating From A- To BBB+, Warns US Insolvency Would “Detonate Next Crisis.” ZeroHedge 01.16.18)