Gold, Bitcoin, and the Global Economy: A 2024 Perspective The price of gold has remained relatively steady, although it has retraced from the peak it hit in December 2023. Both Bitcoin and gold, often viewed as “safe-haven” assets, are known to rally in response to expectations of lower interest rates. Bitcoin investors are also anticipating the approval of a Bitcoin ETF in the U.S. by the Securities and Exchange Commission. Bitcoin reached a value of 52k this week, successfully regaining all the gains it lost following the release of the CPI data. I’m of the opinion that this upward trend will persist. I also think that this is diverting attention away from metals such as gold and silver, given that they are all considered safe-haven assets.
Meanwhile, the S&P 500 and Dow Jones Industrial Average continue to reach unprecedented levels, with several stocks also hitting record highs. This trend seems to have diverted interest away from the metals market. Interestingly, following Powell’s recent decision to maintain steady rates, the NYCB stock plummeted by 50%.
In 2023, the U.S. experienced a significant number of bank failures. This has led some, including myself, to subscribe to the “house of cards” theory, where the cards represent U.S. banks and the house symbolizes the U.S. economy. The question remains: how many more banks need to fail before the economy collapses?
Not too long ago, Yellen made a public statement expressing concern about the pressure on the real estate market and the need for measures to prevent a repeat of the 2008 crisis. She also acknowledged the ongoing strain on bank balance sheets.
Many investors, including myself, believe that as interest rates begin to decrease, the price of gold will increase. As inflation slows down and the likelihood of the Federal Reserve reducing rates increases, gold continues to pull back. It’s somewhat perplexing that gold hasn’t fully regained its gains from the COVID-19 era, especially given that the quantitative easing program should have theoretically resulted in a higher valuation of gold prices due to the depreciation of the dollar.
As of 2024, the USA is grappling with domestic issues related to domestic terrorism and acts of political violence in relation to the 2024 presidential election. There are concerns about the escalation of the Israel-Hamas War. The USA is also dealing with a migration crisis, with a recent surge of migration to the southwest US border caused by criminal activity and corruption in Mexico. There is a serious risk of US military confrontation with China and Russia. In February 2024, the US sent a US$95 billion aid package for Israel, Taiwan, and Ukraine. It’s also interesting to note that the U.S. recently declined a proposal from Russian President Putin for negotiations and a ceasefire. This event appears to have caused little stir in the market, which is intriguing considering the U.S. essentially just committed to continue funding billions of dollars to support a war that doesn’t directly involve the USA.
During times of global instability, such as the Iraq War (2003-2009), the Syrian Civil War (2011-2015), the ongoing Ukraine Crisis (2014-present), and the COVID-19 Pandemic (2020-present), investors have sought refuge in gold as a stable asset. This has led to a significant increase in gold prices during these periods, with prices ranging from $300 per ounce during the Iraq War to $2,000 per ounce in the current pandemic.
The US student loan debt stands at US$1.5 trillion. The Biden administration has forgiven US$136 billion in student loans. The expectation is that students are to get an education, secure employment, create a tangible or intangible asset for their employer, receive money in exchange for their time, and then use this money to repay loans. If this process doesn’t occur, it could lead to the depreciation of the dollar and result in high inflation.
In conclusion, the financial landscape of 2024 is marked by a steady gold price, a rallying Bitcoin, and record-breaking stock market indices. The anticipation of lower interest rates and the approval of a Bitcoin ETF in the U.S. are key factors in these trends. However, the stability of the U.S. economy is under question due to significant bank failures in 2023 and ongoing pressures on the real estate market and bank balance sheets.
Domestic and international issues, including domestic terrorism, political violence, escalating wars, and a migration crisis, add to the complexity. Despite these challenges, the U.S. continues to financially support conflicts that do not directly involve it, a move that has surprisingly caused little reaction in the market.
Periods of global instability have historically led to a surge in gold prices, as investors seek out this safe-haven asset. From the Iraq War to the ongoing pandemic, these events have seen gold prices rise from $300 to $2,000 per ounce. This trend emphasizes the enduring role of gold as a reliable asset in times of worldwide turmoil.
The U.S. student loan debt, standing at US$1.5 trillion, is another major concern. Although the Biden administration has forgiven US$136 billion in student loans, the expected cycle of education, employment, and loan repayment is not always fulfilled, potentially leading to dollar depreciation and high inflation.
As we navigate these turbulent times, I believe many investors like myself are hopeful for a rally in gold prices to all-time highs and maintain those levels in 2024.