The price of gold and silver has been soaring over the past week as concerns around the global banking system have intensified. Gold rose 9.65% against the US dollar to $1,988 per ounce, approaching the $2,000 per ounce mark, while silver rose by more than 12% to $22.59 per ounce. Confidence in the banking system is at an all-time low and five major banks have recently received bailouts, leading to speculation that the Federal Reserve will implement further monetary easing. This has led to bullish predictions for the price of precious metals going forward.
Commentators have expressed cautious optimism for the future of bitcoin in light of the issues facing traditional banking institutions. Bloomberg’s senior macro and commodities strategist, Mike McGlone, suggested on Twitter that bitcoin may become a strong safe store of value, similar to long-dated US Treasury bonds and gold, as the banking sector comes under stress. He suggested that the cryptocurrency sustaining a price above $25,000 is a sign of “divergent strength.” With the value of gold and silver on the rise, it is possible that demand for other alternative stores of value, like bitcoin, may increase as well.
Investors and analysts are also closely following the unfolding situation in financial markets, which are being directly impacted by the current crisis. Statistics analyst and market movement forecaster Northstar tweeted some historical data on gold’s performance over the years compared to the US dollar index. “In 1974, the US dollar index was 105 and gold was $150,” Northstar said at the time. “In 1981, the US dollar index was 105 and gold was $450. Today, the US dollar index is 105 and gold is $1,810. Do not fear a rising US dollar index – over time, gold faithfully tracks purchasing power destruction.”
Despite the bullish predictions, there are still concerns that the global banking crisis could lead to a major financial crisis. Many investors are hedging their bets by increasing their exposure to alternative stores of value, like gold, silver, and bitcoin. Prices for these assets are likely to continue rising as long as the market continues to display uncertainty and volatility.
