Gold, Bitcoin Hit Record Highs: Are Traders Afraid of Sovereign Debt Loads?

Gold, Bitcoin Key Points

Both Gold and Bitcoin extended their near-term bullish momentum to hit record highs today.
Some analysts speculate Gold and Bitcoin are rallying on the prospect of lower interest rates in the future to keep sovereign debt loads manageable.
Regardless, both Gold and Bitcoin remain “buy the dips” trades until proven otherwise.

Gold, Bitcoin Fundamental Analysis

March 5^th, 2024 is a day that may well be etched into “fiat currency skeptic” history books.

Both Gold, the currency alternative with thousands of years of history as an alternative “store of value,” and Bitcoin, the proverbial “New Kid on the Block” when it comes to non-fiat currencies, hit all-time record highs this morning. Crucially, both these moves are occurring against a backdrop of relatively high interest rates (4.5%+ across the developed world).

Any time you have a huge market move, there are inevitably going to be multiple catalysts. From elevated risk appetite to sticky inflation to record debt levels to ongoing geopolitical tensions in the Middle East and Eastern Europe, there are plenty of reasons that traders are seeking out alternative to traditional fiat currencies in the current environment.

When it comes to gold, my colleague Fawad Razaqzada nailed it earlier today: “Gold’s rally has been fueled by speculation surrounding a potential shift in Federal Reserve policy and lingering geopolitical uncertainties that have bolstered demand for the precious metal, seen as a haven asset. There have also been some concerns about a possible downturn in equity markets, especially in the technology sector following the recent eye-watering gains.”

For Bitcoin, excitement about the upcoming quadrennial “halvening” of the cryptocurrency’s new supply and relentless inflows into US ETFs ($8B in less than 8 weeks) are driving the entire crypto space higher:

Source: Farside Investors

From a bigger picture perspective, some analysts are speculating that the market is “sniffing out” the fact that the US and other developed countries will be unable to maintain high interest rates for long given their record debt loads. In that view, the only way to alleviate the long-term fiscal concerns is through default or a “stealth default” through inflating away the debt. I’m personally skeptical of this view, but with the world’s most prominent alternative “currencies” hitting record highs within hours of each other, it’s certainly worth watching.

Gold Technical Analysis – XAU/USD Daily Chart

Source: TradingView, StoneX

After spending three and a half months consolidating in the $1975-$2075, Gold finally broke out to set a new weekly closing high last week. As the chart above shows, that momentum has carried over into this week, with the yellow metal reaching as high as $2,140 intraday. Technically speaking, the momentum remains clearly at the back of the bulls, though with prices well into overbought territory, a near-term dip back toward previous-resistance-turned-support at $2075 cannot be ruled out. As long as the precious metal remains above that level though, the path of least resistance will remain to the topside.

Bitcoin Technical Analysis – BTC/USD Daily Chart

Source: TradingView, StoneX

Despite the bullish catalysts highlighted above, Bitcoin has seen intraday selling pressure emerge after tagging a record high above $69K. As the chart above shows, Bitcoin is extremely extended on the 4-hour chart, so a deeper retracement would be logical, with the first support levels to watch coming around $62K (23.6% of the 6-week rally) and $57.5K (38.2%).

As with Gold however, the longer-term bias remains in favor of the bulls, so swing traders may look at any near-term dips as opportunities to join the established uptrend at a better price.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.