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Crypto will challenge gold prices in 2022, says trader

By Monte Stewart


Gold bars
Gold will face increasing competition from cryptocurrencies in 2022, says a leading trader - Photo: Shutterstock

Gold will face increasing competition with cryptocurrencies in 2022, one precious metals trader told

“To me, crypto has been the never-ending story because we thought we’d seen the death of (cryptocurrencies) so many times,” Robert Levy, managing director of Vancouver, Canada-based Border Gold, said in an interview on Tuesday 28 December.

“But (Bitcoin) seems to bring back investor interest whenever the price goes down a little bit. So that could be the X-factor for gold – maybe an X-factor in a negative way also.”

Gold rose above $1,800 (£1,340) on Tuesday, but Levy does not expect a significant rise to occur between now and mid-year 2022.

Crypto overtook gold 

Levy said cryptocurrencies overtook gold as an alternative investment in 2021, and the two asset classes have battled to serve as a hedge against risk as investors became concerned about rising central bank interest rates, Covid-19’s impact on the global economy, and the dominance of big tech stocks in the marketplace.

“Being in the gold market, I don't think over the long term that that idea (of crypto being a better hedge) will prevail,” he said.

“But it was a general idea from investors that we need some sort of alternative forms of return. So other investment asset classes got favoured. And gold wasn’t as much talked about, especially once we started renewing that theme.”

Gold remains a sought-after investment, as indicated by retail investors as a long-term hedge, he said, but the commodity needs some buzz to regain momentum. Now that large financial institutions are showing less appetite for crypto, gold could benefit.

Levy is not making any bold predictions about gold versus crypto.

“(Crypto) has really been the alternative to precious metals that I don't think anyone was particularly forecasting or (thought) would last this long either,” he said.

“To say that it’s over might be a little premature, but the relationship between the two because of this similar status as a hedge during times of excess (government) fiscal spending, record low interest rates, it’s almost like they've taken a challenging role to one another and they continue to battle it out for investors (and) excess capital.”

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Some crypto profits rolled into gold

Some investors, he noted, have rolled their crypto gains into gold, and that could be a trend to watch in 2022. Traditionally, veteran and older investors have preferred gold, while newer and younger investors have favoured crypto assets.

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New investors who have done their homework could decide to put their crypto profits into gold, he said. If crypto investors continue to roll their gains elsewhere, they could support gold and silver.

In the meantime, Levy expects gold’s price to remain “status quo.”

He called its end-of-year performance “mediocre.”

“For me, there’s nothing really to be excited about with gold,” said Levy, adding it has “lost its lustre.”

Barring “something absolutely crazy,” he expects gold prices to maintain their status quo in the first half of 2022.

Still waiting for breakout

“We’ve been stuck in this $1,700 to about $1,850 range, and the market hasn't necessarily given us a reason for why it’s going to break out yet,” he said.

Inflation, interest rates, and Covid-19 impacts could have a bearing on gold prices in coming months. But, he noted, pandemic-related effects are much harder to predict than they were a year ago, when a gold sell-off occurred.

Therefore, he is not predicting how the pandemic could affect gold’s price going forward.

Until gold gains from increased buzz from media and the market, he will monitor the number of new buyers versus recurring investors.

“That was a theme of 2021 for us, especially at our company – a lot of new buyers, people who are coming into the market for the first time because they're sitting on cash from the bank and they need to do something with their capital because they're not getting any interest,” he said.

“I think the theme of new buyers increasing investor interest, that will tell the story of higher prices.”

Read more: Crypto market falls as transaction costs rise

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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