Revix Roundup
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Revix Roundup

Revix Roundup | Gold and Crypto fire up

Here’s what happened this last week

There’s no stopping gold as its price continues to climb higher. Gold has returned over 25% in 2020 and over 40% over the last year. Smart money continues to drive the precious metal’s price higher with a record-breaking 3,235 tons of the stuff bought in 2020 alone.

Ethereum, the second-largest cryptocurrency soared to $405 as it celebrated its 5th anniversary and bitcoin saw a breakthrough reaching $11,925. The whole crypto market value increased by over 12% driving our crypto Bundles into double-digit gains for the week and triple-digit gains since the start of the year.

Meanwhile, the U.S economy has seen its worst quarterly GDP drop. So, what’s going on?

Investors — worried by the ongoing pandemic and worsening US-China relations — turned to their investment of choice in times of uncertainty on Monday, pushing the price of gold to its highest level since 2011.

What Does This Mean?

Coronavirus seems to be getting worse in the US, which partly explains why the country’s government is aiming to announce another $1 trillion of support for workers and the economy. One possible result of all this spending, combined with unlimited central bank support, is rapidly rising inflation: more money sloshing around in the economy could see prices for goods and services rise quickly when demand returns — in turn eroding both the value of cash and the regular income paid by bonds. Investors reckon that’s an environment that’ll suit gold, and they’ve been buying up the shiny metal in droves. It’s now worth over $1,900 an ounce, and some analysts think it’ll soon cross the $2,000 mark pretty soon.

Why Should I Care?

New York investment bank Goldman Sachs is raising its price target for gold while sounding the alarm about risks to the U.S. dollar.

In a note to clients Tuesday, the bank reaffirmed its position of gold being “the currency of last resort” amid uncertain economic conditions, raising its price target for gold to $2,300 per ounce after a surge to record levels earlier this week.

The bank tied the metal’s rally to a “potential shift in the U.S. Fed towards an inflationary bias against a backdrop of rising geopolitical tensions, elevated U.S. domestic political and social uncertainty and a second wave of Covid-19 related infection.”

“Combined with a record level of debt accumulation by the U.S. government, real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge,” the note explained.

The current macro environment could impact the dollar’s status as the world’s reserve currency, according to Goldman. Indeed, the bank said that debasement risk is growing as a result of the mounting debt built up by policy makers seeking to combat the economic impact of Covid-19. The combination of debasement risk and piling debt “sows the seeds for future inflationary risk.”

“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows,” the bank said. “With more downside expected in U.S. real interest rates, we are once again reiterating our long gold recommendation from March.”

Year-to-date, gold has gained more than 27% and is currently trading near $1,940 an ounce.

Gold’s price rise might’ve been supercharged by the recently weakened US dollar: the commodity — whose price is quoted in dollars — might be more attractive to non-US buyers when the currency is cheaper. That might’ve helped silver’s recent price rise too, though it does tend to rise more than gold in an economic recovery. Investors, then, might just be hedging their bets, backing gold and silver so they profit no matter what happens.

Invest now

US GDP dropped a mammoth 32.9% in Q2 — the worst quarterly drop of its GDP in history — sharply contrasting with a cryptocurrency market that grew over the same timeframe. By contrast, Bitcoin’s market cap doubled during that same timeframe and Ethereum has fared even better.

Reports of the 32.9% plunge come alongside another 1.4 million in unemployment claims. While it’s a stark reminder of the economic turmoil that the coronavirus pandemic has caused in the United States and throughout the world, the cryptocurrency market has performed considerably better during the same period, highlighting the potential of the asset class.

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The Bank of England is undergoing a redesign of its real-time gross settlement service (RTGS) and has noted that the new design will provide facilities for digital currency transactions if the institution decides to later on support CBDCs, like a digital pound.

The new settlement system is being designed so that the bank could “bolt on” a facility for digital currency transactions.

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Banks across Italy are using R3’s Corda blockchain to vastly speed the process of double-checking transaction logs.

Silvia Attanasio, head of innovation at the Italian Banking Association (Associazione Bancaria Italiana or ABI), said both the process of interbank reconciliation and the technology underlying the exchange of data had to change.

In the old system, reconciliation took a long time and was unpredictable. The average time for reconciliation was between 30 and 50 days, Attanasio said. On Corda, reconciliation is completed within a day.

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  • Did you know that 40% of all gold ever mined in history came from South Africa in just the last 130 years? South Africa still holds the world’s 3rd largest unmined reserves behind Australia and Russia.
  • Gold “karats” come from how it was weighed and comes from the Arabic word qirat or carob bean. Carob beans were once used by gold sellers to balance their scales.
  • Our bodies contain about 0.2 milligrams of gold, most of it in our blood! That equates to one troy fine ounce per 155,000 people… Crazy, right?
  • The largest gold coin in the world is the 1 tonne Australian Kangaroo and is issued as Australian legal tender with a denomination of 1 million Australian dollars (around USD 713,745).

About Revix

At Revix, we’re driven to empower everyday people to become their own wealth managers. Cryptocurrencies have been our first investable category. We offer Bitcoin, a regulated gold tokenised-commodity called Paxos Gold, and 3 ready-made crypto Bundles. These Bundles are like the S&P500 for crypto, and offer passive diversified exposure to the crypto asset class. Investing is as easy as signing up, choosing an asset, and then watching your portfolio grow.

We have some exciting new products on their way. Soon you’ll be able to invest in emerging themes, sectors and asset classes in an effortless way. Sign-up to learn more.

Disclaimer

This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose and before investing, please take into consideration your level of experience, investment objectives, and seek independent financial advice if necessary.

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Sean Andrew Sanders

Sean Andrew Sanders

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CEO & Founder of Revix | CFA® | Finance nerd with a passion for fintech, a flair for detail, and a hint of OCD.