The digital gold standard known as Bitcoin has shown impressive strength in the mist of the recent drop in all precious metals. Gold lost 40 dollars in a 24 hour period to close for the weekend at $1610.30. This loss reflects a 2.4% drop. Silver had a more significant drop falling from $31.00 to close at $29.80 dollars an ounce. This reflects a 3.4% drop in the common man’s gold. These drops have occurred
despite, as Harvey Organ reports, the gold demand for the quarter was 6% higher year-on-year at $66.2bn marking the highest ever Q4 total and driving annual demand in 2012 to a record value of US$236.4bn.
So if in the final Quarter of 2012, gold demand was 6% higher than it was in the
final quarter of 2011, how are we experiencing these rather significant waterfalls in
precious metals? There is much speculation of course that investors are cautious
as they await the outcome of the up and coming G20 Finance ministers and central
bank governors meeting being held in Moscow. The speculation being of course
that the currency war that was predicted in the book by James Richards is in its
beginning phase as GDP’s fall in Japan and everywhere in Europe, not to mention
Greek youth unemployment being at 61.7% and generally at 27%. What is left for
the failed economic policies of the money printers other than to print money.
What should be noted from all those sound money advocates should be how
bitcoin has preformed throughout all of this. Since Feb 1st of this year bitcoin has
appreciated by almost 38%. In the last 24 hours alone it has managed to gain 4.4%
despite the loss in it’s sister assets of precious metals. Of course there are other
factors that can be attributed to Bitcoin’s impressive run to start off 2013. With
the Bitcoin block reward suddenly being cut in half, the ease of reward in mining
bitcoins has been somewhat subdued. With bitcoin being harder to mine the price of
the asset increases, the same being true for precious metals.
The fact that Bitcoin has increased in value while her sister assets have suffered
recently is the point. Precious metals should be higher as well as the “stronger
dollar” explanation is laughable to everyone not working for a major banking firm
nowadays. Non-tangible assets higher than tangible ones..hear the birds chirping? A
better explanation is that bitcoin is the only financial asset that truly reflects a free
market. There are no future contracts, no naked short positions in bitcoin that can
prevent real price discovery. Bitcoin is a world market and its value is determined
by thousand of free marketers that allow its value to be decided by the world
commutiny of users. No central manipulation necessary.
As the currency wars begin to unfold, tangible assets will be the protector of wealth.
Everyone knows that the suppression of real market value in physical metals cannot
continue, it’s the final date that no one knows. For the extra savoy stacker, bitcoin
is perhaps the darling of the group right now as it the only asset that the wealth
destroyers cannot manipulate.