“Gold is trading as if we were in a crisis”: Kobeissi analysts

Gold has not stopped recording new all-time high prices this year. This reflects a sustained growing demand for the precious metal, something that usually occurs in times of economic uncertainty.

“Gold is traded as if we were in a crisis,” comment the specialists at The Kobeissi Letter, a bulletin of capital market analysis. Its price today reached a record of 2,685 dollars (USD) per ounce. If the current rate of increase continues, the asset could experience its best year since 1979, as seen below.

For The Kobeissi Letter, this is because the Federal Reserve (Fed), the US central bank, has cut interest rates as if the economy were in recession. It argues that this measure does not fit with the expectation of a “soft landing”, a term that refers to the gentle slowdown of the economy without becoming recessive.

“The real problem here is that the US federal debt is out of control,” the financial bulletin notes. This has reached a historical record of USD 35 billion (trillions in English), which means it has added an average of USD 280 billion per month since 2020. “This is a crisis,” considers The Kobeissi Letter.

However, the newsletter’s specialists emphasize that rate cut is a major driver for all marketsas it increases liquidity. That is why, in addition to gold, stocks and bitcoin have been motivated upwards by this monetary policy. Meanwhile, the value of the dollar against other fiat currencies has been affected.

With these reactions, investors are turning to various assets to maintain and increase the value of their capital. Likewise, the general rise in the markets reflects mixed feelings, as not only gold has reached historical high prices, but also the S&P 500 (SPX).

While the rise in gold indicates fears of a crisis, the rise in the SPX (index that compiles the shares of the main 500 companies listed in the United States) demonstrates a bullish sentiment for the economic industry. In fact, in line with the latter, Jerome Powell, president of the Fed, has given an optimistic vision for the economy.

High volatility is expected for the markets in the face of economic data

Given this situation, as CriptoNoticias anticipated, it is possible that the markets will experience high volatility in the face of the following economic data, such as the PCE that will be published this Friday. If recession risks grow, stock markets could show a downward trend changeunlike gold which can be driven higher.

Meanwhile, Bitcoin is considered by some to be a short-term risk asset due to its high volatility, but a long-term safe haven as if it were “digital gold.” The reason for this is that it has a scarce supply with decentralized mining like metal, which facilitates its price increase in response to demand.

This may explain the fact that bitcoin remains, despite the recent rise, in a sideways range for six months after having reached an all-time high. Therefore, As the economic scenario becomes clearer, its market could be impacted, as well as stocks and gold..

Currently, bitcoin is trading near USD 65,000, 10% below its all-time high price recorded six months ago. Despite this, it maintains an increase of 45% during the year, which is greater than the 29% recorded by gold and 21% recorded by the SPX in that same period.