The price of gold has had a huge rise in 2024. According to technical analysis metrics interpreted by specialists from 'The Kobeissi Letter', this has taken gold to an “extreme” level that has been rarely seen in the history of gold trading. this precious metal. The aforementioned analysts explain that The price of gold is 15% above its 200-day moving average. This gap is the widest that gold has reached in the last 4 years and from the 1980s to today, something similar has only been seen 8 times. The 200 period moving average is a technical indicator used in time series analysis that helps identify the general price direction. Its long-term perspective allows daily price fluctuations to be smoothed out and makes it easier for traders to see clearer patterns in the asset's behavior.
This graph shows the points classified as “extreme” by The Kobeissi Letter of the price of gold in the last 40 years. Source: The Kobeissi Letter Days ago, the same group of analysts had commented in a bulletin that “gold is trading as if we were in a crisis.” Then, Its price had already reached USD 2,660 per ounce. Faced with panoramas similar to those shown by gold today, specialists indicate that its reaction has been to remain sideways in the following months, with increases that average, at most, 5%. However, The Kobeissi Letter warns that this asset could be overextended in the market in the short term, so some downward correction could be expected.
What has brought gold to this point?
Gold was and continues to be considered a refuge of value in scenarios of instability or economic crisis. The current global context seems to be pushing investors to turn to gold to protect their assets. On the one hand, there is the 50 basis point reduction that the United States Federal Reserve (Fed) announced on September 18 in interest rates. Although the measures taken by the Fed are intended to encourage economic activity (something that usually encourages the movement of money from safe haven assets to risk assets) gold continues to rise. This could be interpreted as confirmation that The market, in general, is expecting a recession. On the other hand, there is the war between Israel and Iran, which seems to be escalating week after week and is causing a stir in the markets. Added to this situation is Türkiye's intention to join the BRICS. It is worth highlighting the relevance of Turkey as the country that has control of the Bosphorus canal, the main sea route for transporting oil from the Middle East to Europe. As if that were not enough, there is also the fact that debt levels in the United States are rampant. By January 2024, the debt was $34.7 trillion. That is, 124% of the country's GDP. No third world nation could carry a crisis-free country with such a level of debt. If it closes above $2,600 in 2024, gold would have its best year since 1979. At that time, it had a return of 126%. Curiously, in the geopolitical and economic sphere, that year has certain parallels with 2024. By 1979, inflation in the United States reached 2 figures, around 13% of annual accumulated inflation. Among the measures taken by Paul Volcker, who was president of the FED at that time, was the increase in interest rates up to 10%. Double what we have today. Additionally, the Iranian revolution, which led to the overthrow of Mohammad Reza Pahlavi (supported by the United States) caused upheaval in the Middle East, which ended up affecting oil supplies and causing even more damage to the economy. The geopolitical and economic upheaval seems, for now, to be a breeding ground for a recession and the price of gold is an example of this.
Bitcoin: digital gold or risk asset?
For many in the Bitcoin ecosystem, this digital currency has been a tool to store value and has been compared to gold on multiple occasions. However, there are also those who argue that BTC is a risky asset, especially due to the volatility in its market. Let's look at the following graph to draw a definitive conclusion:
Historical bitcoin price chart. Source: TradingView. Beyond the volatility it may have, looking at the historical price graph of bitcoin from its beginnings to the present, it is evident that, in the long term, it has served as a refuge asset and reserve of value.