Market Update 7 Sep 2012 – Pt, TLT and Bitcoin
This was a bad week for most investments, with announcements of QE in Europe, and hints and rumors of QE from the Fed pushing down all the major currencies, and hurting most of the investments denominated in them.
The biggest loser was TLT, our proxy for long tern treasury bonds, off 7.2%. See the chart and more comments on TLT below. Although the EUR fell less this week than the other currencies, it ended the week at a new all-time low of 22.7 mg. The EUR is now down about 11% so far in 2012.
The biggest winner was silver, which rose 0.7%. The only other gainers were the HUI gold stocks, up 0.6%, and copper, which added 0.5%.
US stocks, while down for the week, fell less than the currencies, bonds, or the commodities (ex silver and copper). They are now the best performing asset class in our chart over the last 12 months, with the S&P up 25.7%.
Platinum, after making a new low on August 13th, has gradually recovered by about 7%, but is still trading at a 7% discount to gold, presenting a good buying opportunity.
In my Aug-17 Market Update, I indicated that TLT was at a critical point, trading near the lower edge of its channel, and near its 200 day moving average. Over the last year, whenever TLT reached these levels, buyers stepped in and pushed the price up. This doesn't seem to be happening this time around, however. After struggling to rise 2.9% at the end of August, TLT has since dropped 8%, and now sits 2.3% below its 200 day average. It will be interesting to see how the Fed responds in its upcoming FOMC announcement. They are in a tough spot, however, as any new money that is used to push rates down will also depress the value of the USD.
New this week to Priced in Gold is coverage of Bitcoin, a digital currency that has been circulating for the last two years. Rather than relying on a central bank to control its issuance, and government law enforcement to prevent counterfeiting and fraudulent transactions (actually to prevent any type of transactions the government frowns upon), bitcoin uses the internet and cryptographic techniques to allow anyone, anywhere in the world, to accept, originate and verify transfers – for free. Already there are many exchanges where bitcoins are bought and sold for national currencies, and web merchants are starting to adopt bitcoin as a means of payment. Bitcoin stock exchanges, auction sites, and other marketplaces are springing up all over the internet.
How do gold coins and bitcoins "stack up"? Will bitcoins replace gold coins? Is bitcoin a flash-in-the-pan that will disappear even more quickly than it came on the scene? Will governments allow bitcoin to exist alongside their currencies? Do they have any choice? Should you get started with bitcoin now, or wait until it has more of a proven track record? I will be speaking about these topics at the London Bitcoin 2012 Conference. If there are any subscribers in the area, I'd love to meet you – please drop me an email, and we'll work out a time to get together.