The precious metal popped to its weekly high today, extending gains from the previous session after Federal Reserve Chairman Jerome Powell appeared to set the stage for an interest rate cut later this month.
Spot gold surged as high as $1,427.06 per ounce its highest point since July 3 at $1,426. Gold futures, meanwhile, peaked above $1,429.
Meanwhile, bitcoin trended in negative territory following Powell’s inclination towards a benchmark rate cut. The world’s leading cryptocurrency dropped by as much as 15.4 percent to $11,169.36. Market participants observed that bitcoin’s fall coincided with Powell’s negative remarks on Facebook’s upcoming cryptocurrency project, Libra.
“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability,” said the US central banker.
Investors Picked Gold Over Bitcoin Against Inflation
Analysts have been bullish on the social media giant’s cross-border remittance solution. They believe it would pave the way for broader adoption of bitcoin and other cryptocurrencies. But with the project receiving skepticism from governments and regulators around the world, its near-term future is looking bleaker.
Bitcoin, on the other hand, is stuck between two polar opposite fundamentals. An interest rate cut should ideally be bullish for the cryptocurrency since its quoted currency – the US dollar – will become weaker. At the same time, a delay in the launch of Facebook Libra could be bearish for bitcoin.
For now, bitcoin bears seem to hold the high ground. The cryptocurrency’s move downhill prompted investors, especially fund managers, to pick gold as their safe haven asset of choice. At least that is what crypto skeptic Peter Schiff of Euro Pacific Capital Inc said when he pitted the precious metal against bitcoin.
Today the Fed indicated that it wants more inflation, and that it will cut rates to bring that about. Since inflation erodes the purchasing power of the dollar, investors sought a monetary alternative that acts as a store of value. That’s why they bought gold and not Bitcoin!
— Peter Schiff (@PeterSchiff) July 11, 2019
It’s a Technical Correction
Still, bitcoin has surged more than 200 percent in 2019. In the previous fiscal quarter alone, BTC rallied from $4,000 to $10,750. The parabolic move saw bitcoin briefly correct downwards on multiple occasions, only to recover in short order.
The first of these pullbacks appeared during the May 16-17 trading session, wherein the price dropped more than 20 percent. In the last brief correction, bitcoin plunged by almost 30 percent, only to experience a steady recovery of 25 percent.
According to eToro Senior Market Analyst Mati Greenspan, the cryptocurrency dropped because of idiosyncratic factors. He stated that the market is familiar with such volatile downturns.
“It seems that the market wasn’t ready to break a fresh highs just yet, and (bitcoin) is now back near the low end of its most recent range” of $10,000 to $14,000,” Greenspan told CNBC.
At press time, bitcoin traded at $11,694 for a daily loss of around 4.6 percent.