Fox Business/Jonathan Garber
Bitcoin no match for gold in coronavirus world
The recent surge in bitcoin’s price has created some new believers, but the cryptocurrency will never supplant gold as a store of value or medium of exchange, some Wall Street investors say.
The cryptocurrency’s price has soared more than 70% over the past six weeks to more than $18,000 a coin and is 11% below its all-time peak of $20,089. At the same time, gold’s price has traded in a tight range between $1,850 and $1,950 an ounce.
“To try to act like bitcoin is some kind of improved version of gold, it’s going to disrupt gold because it’s a better store of value, it’s a better medium of exchange, all that is pure nonsense,” said Peter Schiff, CEO of Westport, Conn.-based Euro Pacific Capital. “It’s not a store of value because it has no value in store.”
Gold, widely viewed as a safe haven for investors seeking to preserve wealth during periods of market upheaval such as the coronavirus pandemic, has value not only in trade but its use in fine jewelry and electrical conductivity.
Bitcoin, generated — or mined — by the verification of transactions in a blockchain digital ledger, has no use other than as a limited medium of exchange and has historically been subject to wide price swings.
Early in the Trump administration, a run-up in bitcoin prices prompted speculation that it could replace sovereign currencies. Excitement surrounding bitcoin in December 2017 spurred the launch of bitcoin futures and led to several platforms allowing customers to buy and sell the digital currency.
The wave of interest sparked regulatory concerns in Washington and led to hearings on Capitol Hill in October 2018.
“Crypto is the mother or father of all scams and bubbles,” Nouriel Roubini, CEO of Roubini Macro Associates and a professor at New York University’s Stern School of Business, said in testimony before the U.S. Senate Committee on Banking, Housing and Community Affairs.
CNN Business/Anneken Tappe
Another 742,000 Americans filed for unemployment claims last week, the first increase in a month
The pandemic is far from over as infections are on the rise and millions of Americans remain unemployed.
742,000 Americans filed for first-time unemployment benefits on a seasonally adjusted basis last week, the Labor Department reported on Thursday. That was a up from the week before and the first increase in unemployment claims since the week of October 10.
Claims are still more than three times higher than they were during the same period last year.
“It’s hard to believe the recession is over if workers keep losing their jobs at this rate,” wrote Chris Rupkey, chief financial economist at MUFG, in a note to clients.
Meanwhile, 320,237 workers filed claims under the Pandemic Unemployment Assistance program, which is designed to help those who aren’t usually eligible for jobless benefits, such as the self-employed. That number also rose from the prior week.
Added together, first-time claims stood at 1.1 million, not adjusted for seasonal changes, a slight increase from the week before.
This is also a worrying development for the broader labor market, and that bad news could show up in the next jobs report. The increase in claims coincided with the survey week for the government’s November report, which is due on December 4, noted Jennifer Lee, senior economist at BMO.
Continued jobless claims, which count people who have applied for benefits for at least two weeks in a row, came in at 6.4 million on a seasonally adjusted basis.
Attack of the debt tsunami’: Coronavirus pushes global debt to record high
The coronavirus crisis pushed global debt levels to a new high of over $272 trillion in the third quarter, the Institute for International Finance said, as it warned of the “attack of the debt tsunami.”
The institute said global debt would break new records in the coming months to reach $277 trillion by the end of the year. This would represent a debt-to-GDP ratio of 365%.
It comes after governments across the world stepped up support for companies and citizens in the face of a global pandemic which led to widespread stay-at-home orders. Businesses also had to look for alternative funding as activity came to a halt in the wake of Covid-19. Both events translated into higher borrowing and, therefore, more indebtedness.
“Spurred by a sharp rise in government and corporate borrowing as the Covid-19 pandemic wears on, the global debt load increased by $15 trillion in the first three quarters of 2020 and now stands above $272 trillion,” the IIF said in its latest Global Debt Monitor, out on Wednesday.
Among advanced nations, debt surged above 432% of GDP in the third quarter — a 50 percentage points increase from 2019. The United States, which has implemented one of the biggest stimulus packages in the world, accounted for almost half of this rise.
Degussa sees gold price rising to $2,500 by mid-2021 as central banks continue to print money
The gold market continues to hold on to critical support above $1,850 an ounce, but shifting investor sentiment following positive vaccine news in the last two weeks created significant pressure for the precious metal.
However, one European precious metals firm does not expect a vaccine for the COVID-19 virus to significantly change the course of the global economy.
“No doubt, there is a great deal of uncertainty about the future course of the world’s economic and financial developments. However, it appears that the savvy investor has quite some reason to expect that interest rates will remain very low in the foreseeable future, simply because overall indebtedness has become too high. Central banks are unlikely to withdraw their support for the economies and financial markets in particular,” said analysts at Degussa in a report published Thursday.
Degussa remains cautiously optimistic on gold’s long-term potential, even as the precious metal currently struggles to attract new investors. In the report, the precious metals firm said it sees gold prices rising to $2,500 an ounce by mid-2021. The analysts said that they see a top-end range around $2,780, with a low end of the range coming in at $2,310.
“At current prices, our estimate implies an upward potential of around 30%,” the analysts said.