Industry News

Gold vs. Bitcoin?

December 5th 2017 | by Vangold

Jeffrey Christian on bitcoin and ‘runaway’ gold price

Jeffrey Christian is the managing partner of CPM Group, a commodities research and management, consulting and financial advisory firm in New York. He founded the company in 1986, spinning off the Commodities Research Group from Goldman Sachs & Co., and its commodities trading arm, J. Aron & Company. Christian is an expert on precious metals markets and took time to speak withThe Northern Miner about his outlook for gold, silver and platinum group metals in 2018.

The Northern Miner: Some people see the rise of bitcoin as a distraction from holding gold or investing in gold stocks. What is your view?

Jeffrey Christian: I don’t think most physical gold investors and gold stock investors see bitcoin as an alternative to gold and gold shares. I know our clients, who tend to be more intellectually oriented and perhaps more longer term oriented, see bitcoin as something they would day trade, but they wouldn’t take a position overnight because they see it as the ultimate fiat currency backed by nothing and no one, and the anti-thesis of gold.

But I’d make a bigger point too: I don’t think bitcoin is distracting many people from gold. What’s distracting people from gold is the stock market. If you look at the cryptocurrency market — bitcoin and the others — it’s less than US$200 billion in open interest, value outstanding, and it’s fewer than a million investors. No one really knows for sure how many are out there but people who manage cryptocurrencies estimate that at the most there are about one million investors participating. The gold market has about US$2 trillion of investor gold holdings. So the open interest is US$2 trillion, or ten times what bitcoin is. And you have billions of people who hold gold, and they hold it because it’s not a fiat currency, it’s an alternative to currency. It’s a tangible asset, the value of which is determined by the market. It’s tangible as opposed to a digit on a computer that can disappear tomorrow. You have about US$300 trillion in stocks and bonds, both of which have hundreds of millions participating in those markets, and that’s where the money is being distracted away from gold. With stocks and bonds it is not just the $300 trillion in stocks and bonds; you have to add in all the index funds and the ETFs based on them. Then it’s quadrillions of dollars.

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