Gold is down, pressuring the 4+ month low established last week, as focus shifts to this week’s FOMC meeting. The Fed will announce policy on Wednesday and it is widely expected that they will raise rates by 25 bps, despite still moribund wages and inflation.
However, the last two December rate hikes (2015 and 2016) closely corresponded with significant lows in the price of gold. The market could be setting up for a similar event this time around, but in 2017 gold has been comparatively buoyant ahead of year end.
David Fickling, writing for Bloomberg, notes the distinct seasonal trend that has emerged over the past decade. “Whatever the reason, it’s enough of a consistent pattern these days that it’s starting to become a self-fulfilling prophecy,” says Fickling.
[G]old exhibits a pronounced seasonality. January, February, July and August — the four months this year when the metal has rallied most strongly — had, on average, been the best months to buy gold over the previous 10 years.
In 2016 and 2015, the lows actually occurred in December. “If history is still reliable, January will be a great month to own precious metals,”said John Rubino in a separate note for Sprott Money.
With BitCoin futures now trading on the CBOE, many are arguing that the meteoric rise of the cryptocurrency is stealing gold’s thunder. This is happening at the same time that many are warning BitCoin has become the biggest bubble since the Tulip-Mania of 1636-1637.
Have precious metals suddenly lost their luster – has their 10,000 year history as a store of value suddenly evaporated within the matter of a month? Of course not. This is absurd and ludicrous and sounds like a copy and pasted line from any MSM financial outlet. — Nathan McDonald, Sprott Money News
Certainly BitCoin has been stealing headlines this year, but how long can this last. Clearly longer than many first thought, but with each push to new highs, it arguably becomes increasingly unstable.
That tweet outlines some very serious concerns. One that is not mentioned, is that to this day, nobody even knows who the creator of BitCoin is in reality. Investing — or perhaps more appropriately speculating — in an asset where that critical piece of knowledge is missing seems crazy to many.
Nonetheless, it’s just one of many oddities that have emerged since the financial crisis that seem to have little grounding in economic reality. That of course doesn’t preclude further gains, but like the price, the risks seem astronomic as well.