Gold prices and bitcoin prices surged on Monday as investors mull the Federal Reserve’s next moves and geopolitical tensions persist in the Middle East.
Gold broke a new record on Monday, punching above $2,100 per ounce in the morning before paring that back to just over $2,000. That marks an 11% increase from the start of the year and a 63% increase over the past five years. The previous record contract settlement high of $2,069 was notched in August 2020 during the COVID-19 pandemic.
HOME ECONOMICS: HIGH HOUSING COSTS MAY HAUNT BIDEN ON THE 2024 CAMPAIGN TRAIL
Gold is a safe-haven asset that investors flee to when there is geopolitical turmoil or uncertainty about the global financial system. It has risen since Hamas launched its attack against Israel on Oct. 7, rising from $1,845 the day before the terrorist attack and the subsequent war against Hamas was launched.
Bullion prices also might be influenced by perceptions that the Fed might begin to cut rates in the coming months, given that the pace of inflation has been meaningfully falling. Higher interest rates encourage investment in bonds, and that, coupled with a weaker dollar if interest rates are driven down, could be good news for gold investors.
“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” Heng Koon How, United Overseas Bank’s head of markets strategy, global economics, and markets research, told CNBC.
But gold isn’t the only asset drawing attention for hitting highs on Monday. Bitcoin was also rallying.
The flagship cryptocurrency peaked at about $41,660 before falling back a bit to $41,400 around midday. That marks nearly 4.3% growth over the past 24 hours. Bitcoin has grown by nearly 9.5% over the past five days alone and more than 18% over the past month — far outpacing increases in traditional assets such as stocks.
The price of bitcoin is now the highest it has been since April 2022, erasing many of the deep losses the cryptocurrency experienced in the second half of last year.
Other major cryptocurrencies tend to move somewhat in tandem with bitcoin. Ethereum, the second-largest cryptocurrency by market capitalization, was up 2.6% to $2,218 and more than 19% over the past month. Cardano was also up 2.6% on Monday while meme-cryptocurrency Dogecoin rose more than 5%.
Behind the recent momentum for cryptocurrency tokens is the anticipation that the Fed is done with its rate hikes and could begin cutting in the first half of next year, as well as the anticipation for the Securities and Exchange Commission’s decision on approving the first spot bitcoin exchange-traded fund. A dozen applicants have applied with the SEC to provide a spot ETF for the cryptocurrency.
“Bitcoin continues to be supported by optimism around SEC approval for an ETF and Fed rate cuts in 2024,” said Tony Sycamore, a market analyst at IG Australia Pty, in a note, according to Bloomberg.
And 2023 has been a great year overall for bitcoin and other cryptocurrencies, many of which hemorrhaged value in 2022. Bitcoin topped out at around $67,000 in November 2021, but following major headwinds in the cryptocurrency world that culminated in the downfall of FTX in November 2022, the price of bitcoin collapsed to under $16,000.
Since its low in November of last year, bitcoin has rallied 164%.
In September of last year, before FTX's collapse, El Salvador’s President Nayib Bukele made major waves when he announced that the country would become the first to recognize bitcoin as a national currency.
Bukele was mocked by some in the following months, given that his country ended up buying up large amounts of the cryptocurrency as an investment. When bitcoin fell even further, Bukele would tweet about “buying the dip” and plan more purchases of the flagging digital asset.
But on Monday, amid the current rally, a triumphant Bukele said on social media that El Salvador’s investments in bitcoin were now in the black for the first time, netting a $3.6 million profit.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“Of course, we have no intention of selling; that has never been our objective. We are fully aware that the price will continue to fluctuate in the future, this doesn’t affect our long-term strategy,” the 42-year-old technocrat said on X, the social media platform previously called Twitter.
“Nonetheless, it is important that the naysayers and the authors of those hit pieces take back their statements,” he continued. “The responsible thing to do would be for them to issue retractions, offer apologies, or, at the very least, acknowledge that El Salvador is now yielding a profit, just as they repeatedly reported that we were incurring losses.”