Many analysts assume that the rise in gold’s price last week may have been supported by the tailwinds that caused the cryptocurrency market (ARKW) to slump, with Bitcoin correcting almost 30%. The physical demand for gold increased staggeringly in the week. The sales data of Frankfurt-based traders showed a fivefold rise in gold physical demand.
Investors often seek the shelter of gold during turbulent times in the markets, and there’s the chance that shaken investors found some solace in gold after the cryptocurrency rout.
Store of value
One similarity we can point to in gold and Bitcoin is that many investors could be turning to Bitcoin for longer-term investments rather than for a short time. Most investors aren’t opting for Bitcoin for daily use; instead, they’re choosing to keep it as a store of value. The case with gold is similar: people don’t use gold for daily expenses, but it’s used a store of value. However, at nearly 80%, Bitcoin’s high volatility deters many investors, and it holds much uncertainty compared to gold.
The increase in the physical demand for gold (GLD) also likely has some backing from the upcoming Chinese New Year. A calendar anomaly could also be what’s helping gold’s price. Gold often performs well during the months of January and February.
Among the mining shares that have risen due to the revival in gold prices are Buenaventura (BVN), Eldorado Gold (EGO), Alacer Gold (ASR), and IAMGOLD (IAG). These stocks have risen 3.7%, 3.9%, 1.3%, and 1.5%, respectively.
Mining stocks tend to take their cues from gold. For our correlation analysis, we'll compare a few different mining stocks to gold.
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