Gold Gains, Bitcoin Investors Are Reminded About What's "Real"
(Kitco News) - March 20 – Gold prices climbed higher overnight. The macro environment remains bullish for the yellow metal, amid rising inflation in the U.S., a spate of geo-political uncertainties, and a Federal Reserve intent on raising interest rates at an extremely low pace.
Gold is often thought of as an alternative currency and has long been known as a "hard" or real asset. Unlike paper investments including stocks and bonds, physical gold and silver and real estate are "hard" assets that you can hold in your hand or drive by.
SEC Dealt a Setback
Investors have been attracted to Bitcoin in recent years as an alternative currency investment. The virtual currency touched a high last week at $1,259. The digitized currency has seen some setbacks, including the recent U.S. Securities and Exchange Commission rejection of a proposed bitcoin exchanged traded fund. Proponents had hoped that an ETF would attract new cash inflows into the virtual currency investment.
Discord in the Computer Community
Bitcoin tumbled as low as $970 over the weekend as the computer development community continues their nearly two-year long fight over the size limit of a "block," which is a term for a group of transactions that is processed on the bitcoin network. Right now, only blocks of a one-megabyte maximum can be processed.
The Unlimited Version of Bitcoin?
There is a group pressuring for an increase to that size. Amid the discord, there is the threat from one group of developers to release a new "unlimited" version of bitcoin - that would not be compatible with the original bitcoin. To many this sounds very theoretical and in reality is not very "hard." In fact, unlimited bitcoin sounds very similar to central banks that can essentially print new money via quantitative easing to increase their balance sheets.
What Makes Gold Different
One of gold's safe-haven allures is that it is a hard asset with intrinsic value and it is immune to central bank monetary policies that can swell money supply or bitcoin developers who can create an unlimited version of the currency.
On this question, gold beats bitcoin, hands down. There is a finite, limited supply of gold in the world and no central bank or software developer can change that.
It's always valuable to step back and see the big picture from time to time. The chart below shows a monthly Comex gold futures chart.