All but three asset classes were lower this week, the gainers being Bitcoin, gold stocks, and long dated treasuries.
Bitcoin ended the week up 51.8% at 1,392 mg, after setting another record high every day this week. The latest round of panic buying seems to have been triggered by the partial bank account confiscation plan announced in Cyprus. The realization that their money is no longer safe in banks has spooked investors across Europe, but especially in Spain, where downloads of Bitcoin software have skyrocketed. Because Bitcoin has such a small market cap, currently about 15,800 kg, and trades less than 200 kg each day, it doesn't take much money moving in (or out) to swing the price, so we should expect continued volatility in the near future.
The government-issued currencies were all lower, led by the Euro, which fell 1.1% to close at 25 mg. The Japanese Yen was down just 0.1%, while the USD dropped 0.8% to 19.3 mg, and is now 16.6% above its half-life curve.
Short term bonds (SHY) fell 0.8%, in line with USD cash. Long bonds (TLT) rose 0.6% to close at 2.27 g.
Stocks were mostly lower, led by the Nikkei Index, which fell 1.9% while the S&P 500 dropped 1% to close the week at 30.12 g. The Gold Bugs Index was the only stock index to rise this week, adding 1.4% to close at 6.96 g. Could the bottom be in for gold stocks? We will see what unfolds next week, but I would be a buyer at these levels, especially given the over-bought condition of the USD.
Commodities were all lower. Cotton fell 6.4% to close at 16.9 mg/lb. Copper declined 2%, and Coffee dropped 1.6% to finish at 26.2 mg/lb. Crude oil also lost ground, falling 0.5%. Silver lost 0.2% while Platinum fell 1.6% to close at 30.57 g, now 1.7% below gold parity.
This week FinCEN, the Financial Crimes Enforcement Network, issued "guidance" about how the US "Bank Secrecy Act" applies to "persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies". For a good discussion, take a look at the comments of the Bitcoin Foundation's legal counsel. In short, this is a trial balloon that needs to carefully monitored to see what elements will actually be implemented in law in the future. As a recent Forbes article notes:
“It’s almost a badge of respect when the Treasury starts regulating you,” said James Rickards, author of Currency Wars. “You must be doing something right.”
“Gold is a great way to preserve wealth, but it is hard to move around,” added Rickards. “You do need some kind of alternative and Bitcoin fits the bill. I’m not surprised to see that happening.”
And in related news, Jeff Berwick of The Dollar Vigilante announced the formation of Bitcoin ATM, a plan to provide ATMs for anonymous purchase and sale of bitcoins. Target location for the first machine? Cyprus! Maybe they can get together with Gold to Go to dispense gold ingots as well!
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