New Relationship Spotted Between Bitcoin And Gold
The correlation is described as a “marginal[ly] negative” one by Christopher Louney, commodity strategist at RBC Capital Markets.
“When we saw interest in bitcoin peak [in December], as measured by Google Trends, that is when we noticed this marginal negative relationship between gold and bitcoin develop,” he told CNBC’s Futures Now on Tuesday.
Louney recognized the difficulty of making the connection, considering how new bitcoin is in comparison to gold.
“When we examine how markets look at bitcoin and gold, we saw a lot of preconceived notions driving the theories around the relationship between the two. What we did is pull together what data we had and compared that to gold,” he said. “It is really hard to put your hands around a tangible correlation between bitcoin prices and gold prices.”
The correlation between the two revealed itself only in the end of 2017, Louney added.
“Our view is that it is currently a marginal negative relationship, but there are a lot of interesting things happening at the same time.”
Louney also discussed gold’s behavior at the time of the most recent equities correction.
“Gold has not performed very impressively. If you told me two weeks ago that we were going to have this correction in equities, I probably would have pushed for a higher price in gold. However, what we’ve seen so far has been pretty disappointing from [a] gold price standpoint,” he said.
RBC has been forecasting a consolidation in gold prices, which Louney said we are witnessing now.
“It is a little bit surprising that it is happening at the same time as equities have fallen. But, you have to remember that the dollar has strengthened and rates are higher, and those are a part of the long-term macro headwinds for gold,” commodity strategist said.
Louney added that RBC’s 2018 gold price average is currently at $1,303, but noted that the yellow metal could see significant support come from a more sustained equities correction.
“The real risk is that if we see equities deteriorating further and sustainably, we might have an uptick in gold and that is when we’ll have to rethink our view,” he said.
Gold prices were trading flat during the opening hours of the Asian session on Thursday, with spot gold on Kitco.com last at $1,318.20, up 0.02% on the day.