Raw material-virtual asset prices soar
Increased investment in preparation for decline in dollar value… International gold prices hit record highs every day
Bitcoin also exceeds $42,000… “Price rises steeply, so be cautious about investing”
On the 5th, the Bitcoin price is displayed on the electronic display board of the Bithumb Customer Support Center in Seocho-gu, Seoul. According to CoinMarketCap, a virtual asset information site, as of 7:20 a.m. on this day, Bitcoin reached $42,372, breaking the highest in 20 months. As expectations spread about a base interest rate cut in the United States next year, the prices of raw materials, including gold, and virtual assets, such as Bitcoin, are soaring. As investment demand to prepare for the future decline in the value of the dollar increases, it is predicted that the strength of these assets will continue next year.
According to the New York Mercantile Exchange (COMEX) on the 4th (local time), the international gold futures price ended trading at $2,042.20 per ounce on this day. During the day, it rose to $2,152.30, breaking the all-time high. According to Reuters, exchange traded funds (ETFs) that track gold prices also saw the largest inflow of funds in 20 months. Last month, more than $1 billion (approximately KRW 1.311 trillion) was net inflow into ‘SPDR Gold Shares’, the world’s largest gold spot investment ETF. This is the largest since March of last year. Silver and copper prices also rose by nearly 18% and 7%, respectively, compared to October 4.
The price of Bitcoin, called ‘digital gold’, is also rapidly rising. According to CoinMarketCap, a virtual asset information site, as of 7:20 a.m. on the 5th, Bitcoin hit $42,372. This is the first time since April of last year that Bitcoin exceeded $42,000. Ethereum, which ranks second in market capitalization after Bitcoin, also rose by more than 20% compared to a month ago as of 9 a.m. on this day, and the total virtual asset market capitalization exceeded $1.55 trillion.
Since the demand for safe assets began to increase due to geopolitical risks such as the Israel-Hamas war, expectations for an early interest rate cut by the US central bank, the Federal Reserve, have recently increased, which is interpreted to be fueling the prices of raw materials and virtual assets. Bitcoin is recognized as having an advantage in that its total issuance amount is fixed despite high volatility. In addition to the news of the imminent launch of a Bitcoin spot ETF in the U.S. market, the fact that next year is the Bitcoin halving period also acted as positive news. Some predict that the price of gold could hit another record high next year. Oh Jae-young, a senior researcher at KB Securities, said, “Gold prices could rise to $2,400 to $2,550 around the second half of next year.”
However, while there is still debate in the market about the timing of the Federal Reserve’s interest rate cut, some believe that the current price rise is too steep. This is because the market is moving in the opposite direction despite Federal Reserve Chairman Jerome Powell’s series of ‘hawkish’ (favoring monetary tightening) remarks. Following the 1st of last month, Chairman Powell also hinted at the possibility of further tightening on the 9th, saying, “If an additional increase is necessary, we will not hesitate.” Nevertheless, some market experts predict that the Federal Reserve will lower the base interest rate as early as the first half of next year. There are also warnings to be cautious about virtual asset price volatility. Lee Jeong-hwan, a professor at Hanyang University’s School of Economics and Finance, advised, “Overall, virtual assets will show an upward trend, but if they are used only as speculative assets, the fluctuations will inevitably be large, so we must be careful.”
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.