Why Gold And Bitcoin (BTC) May Not Be On The Same Side

Chart for Gold (1M) Gold has seen extensive sell off since 2013. This was the same time Bitcoin (BTC) also fell significantly following the Mt. Gox hack. The price of Gold formed a double top and declined rapidly as it broke below the 21 Month EMA. In early 2016, Gold managed to climb above the 21 Month EMA and investors’ confidence was restored. However, it failed to appreciate significantly and soon fell below the 21 Month EMA again. The price of Gold is still below the 21 Month EMA but it now faces a new challenge. The trend line which previously served as a support has now turned into a strong resistance. In order for investors and analysts to turn bullish on Gold, the price of Gold will have to climb above both the trend line and the 21 Month EMA. For Gold, the scenario is currently bearish whereas for Bitcoin (BTC) it is bullish. This is the primary reason why we believe Gold and Bitcoin (BTC) may not be on the same page. Gold has broken below the 21 Month EMA which is a clear sign of bearish price action. Bitcoin (BTC) on the other hand has remained above the 21 Month EMA which is a clear sign of bullish price action. To some, this might appear to be a coincidence but we believe that is not the case. If look at Gold’s trading history, it has had an inverse reaction with the stock market. As stocks rally, Gold usually takes a hit and as stocks falls, people buy Gold as a safe haven. All of this worked without much confusion until Bitcoin (BTC) entered the scene. Chart for BTC/USD (1M) Bitcoin (BTC) has a direct relation with both Gold and the stock market. Now some might say, “How is this even possible?” Well, Bitcoin (BTC) is technically a commodity and a safe haven asset just like Gold. However, it is also a speculative and risky asset like stocks. That should be enough to establish that Bitcoin (BTC) can rally with both Gold and the stock market, but at different times. Until recently, as speculative assets would fall, Gold would be the go to asset for most investors. However, with the advent of Bitcoin (BTC), we now have another safe haven asset. Recently, when Gold rallied we saw Bitcoin (BTC) rally same as Gold. However, it continued to rally even as Gold took a hit but the stock market rallied. Chart for S&P 500 (1D) Historically, late October is the time for stock market buybacks. This is the period when we can expect the stocks to rally again. We have already seen the S&P 500 show signs of a reversal. Interestingly enough, Bitcoin (BTC) has remained above the 21 Month EMA while Gold has remained below the 21 Month EMA during this time. This means that if nothing extraordinary happens, we should see the stock market rally along with a rally in Bitcoin (BTC). Gold will remain below the 21 Month EMA not because of losing its charm as a safe haven but because risk taking is returning to the market. googletag.cmd.push(function() { googletag.display('div-gpt-ad-1538128067916-0'); });