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Gold and(or) Bitcoin to Hedge Against Inflation?

Last Friday, Fed Chairman Jerome Powell made somehow a very “ambiguous” speech giving no details on the timing and pace of a possible taper program. This is despite the inflationary pressure that the general market is facing. He said,

“we have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis.”

However not many shared Powell’s conviction that inflation will subside through the economy this year.

Read: Why Deflation, QE, Helicopter Money, then Inflation, Hyperinflation then Depression?

INVESTORS SHOULD HAVE 10% GOLD MARK MOBIUS

One of them veteran investor and founder of Mobius Capital Partners, Mark Mobius. He expects global currency devaluation next year. This is after an incredible increase of money supply that has been printed, following the fight against the covid pandemic, Mobius told Bloomberg.

Mobius, a long-time fan of the gold is recommending that investors should have 10% portfolio in gold, in particular, physical gold. He said,

“It is going to be very, very good to have physical gold that you can access immediately without the danger of the government confiscating all the gold”

GOLD VS BITCOIN

For crypto lovers, they will argue 1) that bitcoin is a digital version of gold. 2) Bitcoin will undoubtedly gives better return than the yellow metal. 3) Bitcoin is definitely a better hedge against currency devaluation.

Bitcoin exceptional performance

After all, this has already becoming a fact. Bitcoin has risen more than 700% to ~USD50K a coin since the pandemic while gold price’s performance is definitely more subpar. Gold rises from USD1,400 during the pandemic to hit peak price beyond USD2,000 per ounce in Aug 2020, before tapering off. Gold is hovering around >USD1,800 per ounce now, rising more than 1.4% after Powell’s dovish speech last week.

Ray Dalio prefers gold

Legendary investor Ray Dalio, said he owns a very small amount of bitcoin for the sake of diversification. He also see the crypto as an hedge against inflation. However, Dalio values gold more than bitcoin.

“If you put a gun to my head, and you said, ‘I can only have one,’” says Dalio. “I would choose gold.”

Regulatory crackdown

Dalio said this because of the long history of gold as a store of wealth, and the likelihood that bitcoin can eventually be heavily regulated by government. This is just like what happens in 1934 where President Franklin D Roosevelt signed the Gold Reserve Act, transferring US’s privately held gold titles and certificates to the US Department of Treasury.

Dalio told Yahoo Finance in March that any further inflationary event could prompt similar action on bitcoin and other cryptocurrencies from federal governments across the world. For instance, Federal Reserve chair Jerome Powell isn’t a fan of cryptocurrencies, calling them “vehicles for speculation” in April this year.

Last week, People Bank’s Of China said Bitcoin has no value and officially announces further crackdown. It is pretty obvious why government is not a big fan of something they have absolutely no control over. After all, “government” means control and regulation.

ROLF’S THOUGHTS

I am a believer of both Gold and Crypto to hedge against the excessive money printing.

One of the biggest mistakes I have made is to sell off my Bitcoin and Ethereum too early to reap the small profits. I just have to learn my lesson going forward. I also got ridiculed by one of the readers due to my “no foresight” at all as he/she is piling into the crypto now.

Nonetheless, profit is still profit, better than nothing.

I bought into Crypto in early 2019 when BTC is a mere USD3,000 a coin. It is also during a time when BTC is unloved and “un-talked” about after the crash from USD20,000 a coin towards the end of 2017 early 2018.

Read: Bitcoin, Then & Now – Loving the unloved?

In that article, I quoted Bitcoin that,

It will make a lot of people bankrupt and a few people filthy rich in this monkey business.”

Unfortunately for me, I did not become filthy rich, although I know there are some who did. Congrats. One small consolation for me, is that I did not become bankrupt. Hooray….

Generally, I believe that the majority is always wrong, against the minority.

Several years back, I written an article “My Rewards from Learning Investment” and in it, I also explained why the majority mainstream is always wrong as most of the times, they only pay attention to themselves, their self-benefit in the short term.

However majority of the people will always think that they are the minority. This is when the minority’s actions are indeed that of the majority. So you know the eventual outcome?

Hence, while I love to own a few coins of Crypto, I am hesitant now when the hype and party is still ongoing. Oh, I do have stocks of coinbase! So not totally Crypto zero!

BUT BUT BUT, please do not ever listen to me, as I have exceptional bad track records in my timing of the market. So please make your own correct judgement and do not listen to my self-rattling here.

The big question:

“Will there be a repeat of 2018 crash in Cyrpto OR will Crypto prices continue to hit the sky?”

Last but not least, I heard someone saying, Gold is God’s money, Crypto is People’s money and Currency is Fiat money.

Hmmm…. interesting isn’t it.

 

 

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