Cryptocurrency craze: Will Bitcoin, Ripple, Ethereum hurt gold in 2018?

Cryptocurrency, or digital currency, is becoming the latest talk among the investing community. Be it Bitcoin, Bitcoin Cash, Ethereum or Ripple, more and more investors in India and abroad are getting attracted by the talk of the massive returns given by these digital currencies.

While there are fears that the froth building around Cryptocurrency prices could hurt those putting money in a hurry of the trend reverses, there are concerns on how digital currency will impact Gold? Is it possible that Gold investors could move over to investing in digital currencies thereby putting pressure on the yellow metal?

Commodity experts feel that gold will come out unscathed from the digital currency craze and might in fact gain if the tide turns away from crypto.

“It has to be believed that gold has been heavily affected by the gaining crypto currency world. The increased acceptability of digital currencies as a safe haven is a threat to gold prices. The main concern over the gold market is, what if the central banks permits to invest in digital currencies that likely takes the place of gold. But, there is no evidence of mass migration from gold to any digital currency,” Hareesh V, Head – Commodities Research at Geojit Financial Services told Moneycontrol.

Hareesh feels that once the rising digital currency tide subsides, gold might gain. “The increased acceptability of digital currencies as a safe haven is a threat to gold prices. However, if the present bullishness in Cryptocurrencies turns to bearish, gold would be the top gainer,” Hareesh said.

Gold has given tepid returns to investors in 2017. In the global spot market the yellow metal had started the year at $1158.8 an ounce and was trading in the $1250 range at the end of the year, a return of around 9 per cent.

Aasif Hirani – Director, Tradebulls, points out that though there are talks of Cryptocurrency eating into gold market, there will be limited impact. “The rise of Cryptocurrency has certainly surprised us and there are views going on that it will be alternate currency and take place of gold. Lot of people see Cryptocurrency as replacement for gold. But we don’t think crypto-currency rise will impact gold in any sort of way. Gold and crypto are two different things. Crypto market is much more volatile and lower liquidity compare to gold,” Hirani said.

He pointed out that gold has a much larger market value of $8.3 trillion while Crypto has $275 billion market value. “Gold is used for diversification and hedging while Cryto is attracting speculative inflows. There is little clarity on how trading in Cryptocurrencies could be made comply the regulatory rules. This will keep the professional traders away. We feel it’s the volatility and rise that have generated this much interest in Cryptocurrencies but we don’t see its rise impacting gold,” Hirani said.

He feels that the factors impacting Gold in 2018 will include the stance of US Fed and other central banks on interest rates. “The approach to tightening US monetary policy will be the main factor that will affect gold. Any movement in US Dollar is also key factor that will affect gold. Any improved demand for physical gold in China and India will also be a factor for gold prices. Any tightening monetary policy from ECB and Bank of Japan will be negative for gold as it indicates their economies are improving,” Hirani said.

Source link - http://www.moneycontrol.com/news/business/personal-finance/cryptocurrency-craze-will-bitcoin-ripple-ethereum-hurt-gold-in-2018-2466975.html/amp