The problem for gold is that institutional investors are turning toward bitcoin. It is a new phenomenon that is likely to continue in the years to come, said JPMorgan strategists in a note to clients this week.
“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced,” the strategists wrote. “If this medium to longer term thesis proves right, the price of gold would suffer from a structural flow headwind over the coming years.”
The bank’s strategists show in their research that new investors embraced bitcoin in October and November while choosing to sell gold positions.
One example that the strategists provided is the Grayscale Bitcoin Trust, which had almost $2 billion of inflows since October. In comparison, gold-backed exchange-traded funds saw $7 billion of outflows, JPMorgan noted.
Right now, bitcoin represents only 0.18% of family office assets, while gold represents 3.3%, said the bank’s strategists, including Nikolaos Panigirtzoglou. If this begins to shift dramatically, bitcoin could see new inflows of billions.
Bitcoin prices doubled in value from a low of $10,000 in September to just under $20,000 in November. During that time, the gold rally has stalled, and prices temporarily dropped below $1,800 an ounce.
JPMorgan is not alone in saying that a possible explanation behind this drop in gold-backed ETF demand could be bitcoin’s record-high rally, which intensified last month
Singapore’s United Overseas Bank (UOB) said in a report this week that the crypto’s popularity could be partly responsible for gold’s drop. Still, it is far from being the sole cause.
JPMorgan said that bitcoin prices in the short-term have run a bit ahead of themselves, noting the cryptocurrency’s new record high of $19,850, which was reached on November 30. At the time of writing, bitcoin was trading at $18,331.30, down 1.22% on the day.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 1,864.22.
The projected upper bound is: 1,899.72.
The projected lower bound is: 1,769.16.
The projected closing price is: 1,834.44.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
An inverted hammer occurred. If this occurs during a downtrend (which appears to be the case with PREC.M.XAU=) it implies a reversal. Look for a confirmation of the reversal on the bar.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
A shooting star occurred (a shooting star has a small real body near the bottom of the candle and a long upper shadow). During an uptrend the long upper shadow indicates that the bears are gaining control and a top may occur.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 27.0382. This is not an overbought or oversold reading. The last signal was a sell 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.06. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 8 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 40. This is not a topping or bottoming area. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed up 0.390 at 1,835.700. Volume was 8,900% above average (trending) and Bollinger Bands were 3% narrower than normal.
Open High Low Close Volume 1,834.550 1,839.123 1,834.500 1,835.700 2,580
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1,834.60 1,874.69 1,808.81 Volatility: 20 22 24 Volume: 258 52 13
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 1.5% above its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future.
Our volume indicators reflect very strong flows of volume out of XAU= (bearish). Our trend forecasting oscillators are currently bearish on XAU= and have had this outlook for the last 18 periods.
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