Bitcoin Plunges As Gold Price Extends Win Streak

December 29, 2017

New York (Dec 29)  Is Gold The New Bitcoin? While Bitcoin and other cryptocurrencies have been getting all the attention, gold's recent advance has stayed under the radar.

The precious metal has gained more than 4% over the past two weeks and is now near $1,294.90, according to Kitco . Meantime, Bitcoin as tracked by Bitcoin Investment Trust (GBTC) has plunged 44% from Dec. 18 to Dec. 28.

Of course, GBTC is still up nearly 1,500% for the year compared with gold's 12% advance based on SPDR Gold Shares (GLD) and iShares Gold Trust (IAU). But is gold's increase due to the usual Chinese New Year-related sales, or could it be a longer-lasting shift?

GLD and IAU, which advanced for a ninth consecutive session Thursday, gapped up above their respective 50-day moving average lines on Tuesday. While both ETFs had undercut the 50-day too deeply to stage a rebound off the line, shares are testing earlier areas of upside resistance. These could offer early entry points if SPDR and IAU keep rising.

In a late August breakout past a 123.41 flat-base buy point, GLD rose 4% to its Sept. 7 intraday high. IAU advanced more than 3%, also from a late August breakout to a Sept. 7 peak.

Both funds track the price of gold bullion. GLD has amassed $34.4 billion since its November 2004 launch; IAU has attracted $10 billion since its January 2005 debut. Both ETFs have offered a 4.1% average annual return over the past 10 years vs. the S&P 500's 8.5% gain. GLD and IAU carry respective expense ratios of 0.40% and 0.25%.

Despite the drastic outperformance of Bitcoin or the equity market vs. gold, investors may want to consider rebalancing gold holdings in their portfolio, U.S. Global Investors CEO Frank Holmes said in a recent blog post . He suggests a 10% weighting in gold.

IBD'S TAKE: Are Bitcoin, Ethereum and other digital currencies real investments or a speculator's game? Individual investors should be extremely cautious about diving into this new area. Read this feature about Bitcoin risks  and possible gains first.

"It's important to remember that the precious metal has historically shared a low-to-negative correlation with many traditional assets such as cash, Treasuries and stocks, both domestic and international," he wrote. "This makes it, I believe, an appealing diversifier in the event of a correction in the capital and forex markets."

In addition, he points out that gold's price has trounced the S&P 500 index since 2000 by more than a 2-1 ratio, at 442% vs. 183%.


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