Hawaii Six O - Gary Wagner
Gold Continues Its Climb to Higher Pricing
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold pricing continues its historic climb to higher prices, gaining yet more value in today’s trading. As of 4:30 PM Eastern standard time, gold futures are trading $4.10 (+0.31%) higher at $1339. Gold continues to ride the tailwinds created from a tumbling U.S. dollar, which is currently off by over a half percent today as it broke below the major support level of 91 on the dollar index. Our technical studies indicate that there is a clear path for gold prices to challenge last year’s high at $1363 per ounce.
At the same time, many traders have been focused upon the current craze in cryptocurrencies. This reminds me of a scenario that took place during the 17th century in Holland: the tulip and bulb craze of 1630.
Tip Toe Through the Tulips
The cryptocurrency Bitcoin is once again under pressure and losing dramatic value. It has lost approximately 15% on the day. A single Bitcoin traded to a low of $11,039.40 before recovering slightly to close at $11,539. The collective carnage has taken the price of a single coin down more than 30% from the highs achieved last week.
According to an article in MarketWatch today, many cryptocurrencies investors have no intention of selling Bitcoins or their other digital asset holdings until crypto’s overtake fiat currencies, or until they “moon,” reaching astronomical values, whichever comes first.
This attitude reminds me of the tulip and bulb craze that took place from 1634 to 1637 in Holland. According to Investopedia, the price swings for a single tulip bulb oscillated to the extremes at both ends of the range.
“This number is difficult to calculate, but, we can tell you that at the peak of the market, a person could trade a single tulip for an entire estate, and, at the bottom, one tulip was the price of a common onion.”
Basically, in 1593 tulips were brought in from Turkey and introduced to the Dutch. The novelty of the new flower made it widely sought after and therefore fairly pricey. After their introduction, tulips contracted a nonfatal virus known as Mosaic. This virus didn’t kill the tulip population but it altered them, causing flames of colors to appear upon the petals. The color patterns came in a wide variety, increasing the rarity of an already unique flower. Thus, tulips began to rise in price until it reached such a high value that many believed that there would be no limit to how high prices could go.
Needless to say, the prices for a single tulip all were not an accurate reflection of the intrinsic value of the item. Like many speculative bubbles at some point, the student investors decided to sell and pocket their profits. From this point forward, a domino effect was created as prices tumbled when more and more people began to liquidate their holdings.
It is quite evident that there are distinct differences between a tulip bulb and a cryptocurrency, but investors should take away one major lesson. In the case of the tulip craze in Holland, no one really emerged unscathed from the crash. Even traders that had locked in their profits by getting out early suffered from the depression that followed. Simply put; buyers beware.
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Wishing you as always, good trading,