Gold prices dropped and then, rebounded back to ten weeks high above $1325.96 per ounce, following rising tension in Middle East, particularly in Iraq and Syria. Similarly, Bitcoin price hit $650 on BTC-e once more, rising from $590 level. We should note that it’s highly unlikely that there is a correlation between Bitcoin and Gold prices, however both assets sometimes move in the same direction and create unique opportunities for investors.
Below you can find Gold and Bitcoin 24h price graphs gathered from Kitco and Coindesk BPI, respectively.
A brief analysis of Bitcoin and Gold prices
As of writing this article, the rates of Bitcoin and Gold per ounce is $649.55 and $1324.50, respectively and BTC/Gold rate is 0.490. When we look past where Bitcoin rallied back in early days of December 2013, we can see BTC/Gold rate is around 0.874. Considering the period between December 2013 and June 2014, the depreciation of Bitcoin against Gold is 56 percent while the depreciation of Bitcoin against USD is 62 percent. This allows first time buyers, individuals, investors to benefit from hedging. “Hedge” is defined in Investopedia, as “making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.” For those who are familiar with exchange betting, we note that hedging is like covering a bet, resulting minimizing losses and maximizing profit, at a later date.
In this regard, it’s evident that buying gold and/or silver with Bitcoin allows investors this hedging opportunity, as long as they choose to buy physical gold and/or silver with the lowest possible premium.