Bitcoin as a Commodity Currency and Store of Value
Fidelity's director of global macro, Jurrien Timmer, believes that bitcoin has the potential to become an exponential gold. In his view, bitcoin is a commodity currency that aims to be both a store of value and a hedge against monetary debasement. Timmer compares bitcoin to gold, highlighting the historical performance of gold during periods of inflation, negative real rates, and excessive money supply growth.
Gold as a Store of Value
While acknowledging that gold is indeed a form of money, Timmer argues that it is too deflationary and cumbersome to be used as a medium of exchange. Instead, investors primarily own gold as a store of value. This is one of the reasons why bitcoin is often compared to gold. The digital currency offers the potential to serve as a more efficient and accessible store of value compared to traditional gold.
Bitcoin's Correlation with Other Assets
Examining bitcoin's correlation with other assets, Timmer notes that based on monthly data as of September, bitcoin still has a positive correlation with equities, albeit less so compared to many other assets. In terms of portfolio allocation, Timmer suggests that bitcoin should be included in the alternative assets bucket of a 60/40 portfolio. He highlights that while bitcoin's correlation with the S&P 500 is becoming less positive, it remains uncorrelated with other assets such as the U.S. dollar, T-bills, and gold.
A Different Game, but on the Same Team
Timmer concludes that although bitcoin and gold may be playing different games, they can still be on the same team. Despite not being correlated with gold, bitcoin's lack of correlation with other assets is seen as a positive attribute. This non-correlation allows for diversification within the alternative assets space and minimizes the risk of having all assets move in the same direction.
What are your thoughts on Fidelity's director of global macro's statements regarding bitcoin and gold? Share your opinions in the comments section below.
Frequently Asked Questions
Do You Need to Open a Precious Metal IRA
You should be aware that precious metals cannot be covered by insurance. You cannot recover any money you have invested. All your investments can be lost due to theft, fire or flood.
It is best to invest in physical gold coins and silver coins to avoid this type loss. These items can be lost because they have real value and have been around for thousands years. You would probably get more if you sold them today than you paid when they were first created.
When opening an IRA account, make sure you choose a reputable company offering competitive rates and high-quality products. You should also consider using a third party custodian to protect your assets and give you access at any time.
Remember that you will not see any returns unless you are retired if you open an Account. Don't forget the future!
Can I buy gold using my self-directed IRA
However, gold can only be purchased with your self-directed IRA. To do so, you must first open a brokerage account at TD Ameritrade. You can also transfer funds from another retirement account if you already have one.
Individuals can contribute as much as $5,500 per year ($6,500 if married filing jointly) to a traditional IRA. Individuals can contribute up to $1,000 annually ($2,000 if married and filing jointly) directly to a Roth IRA.
If you do decide to invest in gold, you'll want to consider purchasing physical bullion rather than investing in futures contracts. Futures contracts, which are financial instruments based upon the price of gold, are financial instruments. These financial instruments allow you to speculate about future prices without actually owning the metal. But, physical bullion is real bars of gold or silver that you can hold in one's hand.
Can I keep physical gold in an IRA?
Not only is gold paper currency, but it's also money. People have used gold as a currency for thousands of centuries to preserve their wealth and keep it safe from inflation. Today, investors invest in gold as part a diversified portfolio. This is because gold tends do better in financial turmoil.
Today, Americans prefer precious metals like silver and gold to stocks and bonds. It's not guaranteed that you'll make any money investing gold, but there are several reasons it might be worthwhile to add gold to retirement funds.
One reason is that gold historically performs better than other assets during financial panics. The S&P 500 dropped 21 percent in the same time period, while gold prices rose by nearly 100 percent between August 2011-early 2013. During these turbulent market times, gold was among few assets that outperformed the stocks.
Another benefit to investing in gold? It has virtually zero counterparty exposure. If your stock portfolio goes down, you still own your shares. If you have gold, it will still be worth your shares even if the company in which you invested defaults on its debt.
Gold provides liquidity. You can sell your gold at any time without worrying about finding a buyer, which is a major advantage over other investments. Because gold is so liquid compared to other investments, buying it in small amounts makes sense. This allows you take advantage of the short-term fluctuations that occur in the gold markets.
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- 7 U.S. Code SS7 – Designation board of trade as contract marketplaces
- 26 U.S. Code SS 408 – Individual retirement account
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Do you want to keep your IRA gold at home? It's not exactly legal – WSJ
Investing with gold or stocks
It might seem risky to invest in gold as an investment vehicle these days. The reason behind this is that many people believe that gold is no longer profitable to invest in. This belief is based on the fact that gold prices are being driven down by global economic conditions. They think that they would lose money if they invested in gold. In reality, though, gold investment can offer significant benefits. Here are some examples.
Gold is one of the oldest forms of currency known to man. Its use can be traced back to thousands of years ago. It has been used as a store for value by people all over the globe. It's still used by countries like South Africa as a method of payment.
Consider the price per gram when you decide whether you should invest in or not. The first thing you should do when considering buying gold bullion is to decide how much you will spend per gram. You can always ask a local jeweler what the current market rate is if you don't have it.
It's worth noting, however, that while gold prices have fallen recently the cost of producing gold is on the rise. The price of gold may have fallen, but the production costs haven’t.
It is important to keep in mind the amount you plan to purchase of gold when you're weighing whether or not it is worth your time. It makes sense to save any gold you don't need to purchase if your goal is to use it for wedding rings. If you plan to do so as long-term investments, it is worth looking into. Selling your gold at a higher value than what you bought can help you make money.
We hope this article helped you to gain a better appreciation of gold as a tool for investment. We strongly recommend that you research all available options before making any decisions. Only then will you be able to make an informed decision.
By: Kevin Helms
Title: Fidelity's Director of Global Macro: Bitcoin is Exponential Gold
Sourced From: news.bitcoin.com/financial-giant-fidelitys-director-sees-bitcoin-as-exponential-gold/
Published Date: Sun, 05 Nov 2023 04:30:17 +0000