The current rally gold, silver and Bitcoin may be related to the money printing from the Fed.
Let’s see how it can relate to each other and what can we learn from it.
On the same day that the price of gold rose to USD 2,055, the price of BTC climbed to USD 11,715. All three assets are now experiencing significant growth momentum. Silver rose by 90% in April. This phenomenon can be related to several factors: the correlation of gold and Bitcoins, the effect of the falling US dollar on alternative assets and increased liquidity resulting from the aggressive monetary policies of central banks.
It is uncertain whether this correlation is due to the return of investors to the market. However, the data clearly show that all assets fell in mid-March.
It can also be taken into account that the decline of the US dollar has encouraged investors to buy gold. The same can be understood for BTC. Gold and Bitcoin are safe haven for investors and a certain protection against rising inflation. A falling dollar is always positive for each of these assets.
July was the worst month for the USD. High unemployment and an increasing number of coronavirus cases are causing a decline in the US economy. Analysts expect the slump to continue.
Central banks are increasing liquidity
The Fed decided to keep interest rates at zero, which inspired other banks. Monetary policy in China could be more flexible, which China has long avoided. The Thai central bank has decided to keep interest rates low and is hoping that the economy will gradually recover.
All of these things encourage investors to seek safe havens. There is more capital in the market than ever before. Demand for precious metals and Bitcoin will continue to rise, which will increase their prices and thus could lead to a bubble. However there are other digital currencies than just Bitcoin.
The pandemic has given the economy a bad time. Its decline has been the highest in history since 1947. Due to this, investors are resorting to buying gold and other assets they think are safe.