Introduction
Commodity market expert Mike McGlone from Bloomberg has recently expressed concerns about the declining performance of Bitcoin compared to gold. According to McGlone, the bitcoin/gold ratio has dropped by approximately 40% since its peak in 2021.
Bitcoin's Underperformance against Gold
Mike McGlone, a renowned commodity analyst, has pointed out that Bitcoin has failed to keep up with the performance of gold since its peak in 2021. In his recent evaluation of various commodities, McGlone included Bitcoin and highlighted the significance of the bitcoin-to-gold ratio. He stated, "Pattern Recognition, Gaps and Gold vs. Bitcoin — Since they began trading in 1997, S&P 500 E-mini futures never left a gap on the weekly charts until December — from 4,614 to 4,652 — with back-and-fill implications for risk assets."
McGlone further emphasized that the bitcoin-to-gold ratio, which usually serves as a leading indicator, has been trailing since the historic surge in 2021. On January 2nd, the ratio stood at approximately 21 ounces of gold, but it has since dropped by around 40% from its peak of 37x in 2021.
Possible Implications of the Declining Ratio
McGlone's analysis of the bitcoin-to-gold ratio is not new, as he previously discussed it on January 23, 2024. He believes that Bitcoin's underperformance compared to gold, despite the strong performance of the U.S. stock market, could indicate either an opportunity for Bitcoin to catch up or a potential recession. McGlone leans towards the possibility of a recession, expressing concerns if the Bitcoin/gold ratio continues to decline.
This decline in the ratio can be attributed to the end of zero-interest-rate policies (ZIRP) and the liquidity surge in 2021. With the current federal fund rate of 5.58 set by the Federal Reserve, the investment landscape has changed, impacting assets like gold and Bitcoin, which do not generate earnings or interest. Consequently, these assets have become less attractive in portfolios. McGlone even suggests that the recent frenzy surrounding crypto exchange-traded funds might be seen as a signal of a market peak.
Conclusion
The declining bitcoin-to-gold ratio has caught the attention of commodity analyst Mike McGlone, who warns of a potential downturn for Bitcoin. As gold continues to outshine Bitcoin in terms of performance, investors and analysts are closely monitoring the ratio for further indications. Whether this decline signifies an opportunity for Bitcoin to catch up or a potential recession remains to be seen.
Frequently Asked Questions
Can I have gold in my IRA.
The answer is yes You can add gold to your retirement plan. Gold is an excellent investment because it doesn't lose value over time. It also protects against inflation. And you don't have to pay taxes on it either.
Before investing in gold, you need to know that it's not like other investments. You can't purchase shares in gold companies, unlike stocks and bonds. They can't be sold.
Instead, convert your gold to money. This means that you'll have to get rid of it. It is not possible to keep it.
This makes gold different than other investments. You can always sell other investments later. But that's not the case with gold.
Worse, the gold cannot be used as collateral for loans. For example, if you take out a mortgage, you may give up some of your gold to cover the loan.
What does this translate to? You can't just keep your gold forever. You'll eventually need to convert it into cash.
You don't have to worry about this now. All you have to do is open an IRA account. You can then invest in gold.
What precious metals can you invest in for retirement?
Understanding what you have now saved and where you are currently saving money is the first step in retirement planning. Start by listing everything you have. This includes all savings accounts and stocks, bonds or mutual funds. It also should include certificates of Deposit (CDs), life insurance policies. Annuities, 401k plans, real-estate investments, and other assets like precious metals. Add all these items together to calculate how much money you have for investment.
If you are under 59 1/2 you should consider opening a Roth IRA Account. A Roth IRA, on the other hand, allows you to subtract contributions from your taxable revenue. However, you won't be able to take tax deductions for future earnings.
You will need another investment account if you decide that you require more money. Start with a regular brokerage account.
How Much of your IRA Should Be Made up of Precious Metals
You can protect yourself against inflation by investing your money in precious metals, such as silver and gold. It's not just for retirement. It can also be used to prepare for economic downturns.
Gold and silver prices have increased significantly over the past few years, but they are still considered safe investments because they don't fluctuate as much as stocks do. There is always demand for these materials.
Predictable and stable prices for gold and silver are common. They are most likely to rise when the economy grows and fall during recessions. This makes them excellent money-savers, and long-term investment options.
Your total portfolio should be 10 percent in precious metals. You can increase this percentage if you want further diversification.
How do I open a Precious Metal IRA
It is best to open an IRA with precious metals through a Roth Individual Retirement Account.
This type account is better than others because you don’t have any tax on the interest that you earn from investments until you remove them.
This makes it appealing to those who want to both save money and get a tax cut.
There are many other options than investing in gold and silver. You can put your money in almost any item that meets the IRS guidelines.
People often think of silver and gold when they hear “precious metal” but there are many other precious metals.
You can find examples in palladium (platinum), rhodium (osmium), iridium and ruthenium.
There are many ways to invest in precious materials. These include purchasing bullion coins and bars, as well as shares in mining companies.
Bullion Coins, Bars
The easiest way to invest in precious materials is to buy bullion coins or bars. Bullion refers to physical ounces (or grams) of gold and/or silver.
Bullion bars and bullion coins are actual pieces of the metal.
While you might not feel any change when you buy bullion coin bars or coins from a retailer, you will experience some benefits over time.
You'll be able to see a piece tangible of history. Each coin and each bar have a story.
When you look at face value of the coin, you'll often find that it's worth far less than its nominal value. When it was first introduced in 1986, the American Eagle Silver Coin cost only $1.00 per troy ounce. Today, however, the American eagle's price is closer to $40.00 per an ounce.
Bullion has had a tremendous increase in its value since its introduction. This is why many investors choose bullion bars and bullion coin over futures.
Mining Companies
If you are looking to invest in precious metals, there is another option: investing in mining shares. You're investing in the company’s ability to produce precious metals.
You will be paid dividends that are based on the company’s profits. These dividends will then go towards paying out shareholders.
Furthermore, the company has the potential to grow. The demand for the product will also cause an increase in share prices.
These stocks can fluctuate in value so it is important to diversify your portfolio. This is how you spread your risk across different companies.
But, remember that mining companies, like all stock market investments, are susceptible to financial loss.
Your share of ownership may be worthless if gold prices fall significantly.
The bottom line
Precious metals like gold and silver can provide safety during economic uncertainty.
Gold and silver can fluctuate in price. If you're looking to make a long-term, profitable investment in precious metallics, then consider opening a precious precious metals IRA Account with a reputable business.
By doing this, you can reap the tax benefits and still have physical assets.
Statistics
- The IRS also allows American Eagle coins, even though they do not meet gold's 99.5% purity standard. (forbes.com)
- SEP-IRA”Simplified employee pension” For self-employed people like independent contractors, freelancers, and small-business ownersSame tax rules as traditional IRASEP IRA contributions in 2022 are limited to 25% of compensation or $66,000, whichever is less4. (sltrib.com)
- Same tax rules as traditional IRA SEP IRA contributions in 2022 are limited to 25% of compensation or $66,000, whichever is less Before setting up a Silver IRA, understand the fees and IRS restrictions. (sltrib.com)
- Depending on your financial situation, most experts recommend you invest no more than 5% to 10% of your retirement funds in precious metals. (forbes.com)
External Links
kitco.com
wsj.com
regalassets.com
forbes.com
- Gold IRA: Add Some Sparkle To Your Retirement Nest Egg
- Understanding China's Evergrande Crisis – Forbes Advisor
How To
How to Open a Precious Metal IRA
Precious metals remain one of the most highly-valued investment options. Precious metals have a higher return than traditional investments like bonds or stocks, which is why they are so sought-after. But, it is important to do your research and plan carefully before investing in precious metals. Here are the basics to help you open your precious metal IRA account.
There are two main types of precious metal accounts: physical precious metals accounts and paper gold and silver certificates (GSCs). Each type has its pros and cons. GSCs, on the other hand, are more accessible and can be traded. Keep reading to find out more about these options.
Physical precious metals accounts are comprised of bullion and bars as well as coins. This option is great for diversification, but it has its drawbacks. Precious metals can be expensive to store, buy and sell. They can also be very difficult to transport due to their large size.
The silver and paper gold certificates are also relatively affordable. They are also easily available and can be traded online. They are ideal for those who don't wish to invest in precious metals. But they don't offer as much diversification as their physical counterparts. Additionally, they are backed by government agencies like U.S. Mint and could lose value if inflation rates rise.
If you open a precious metal IRA, choose the right account for your financial situation. Before doing so, consider the following factors:
- Your risk tolerance level
- Your preferred asset-allocation strategy
- How long do you have to spend?
- You can decide whether or not to use the funds for trading purposes.
- What tax treatment do you prefer?
- What precious metal(s), would you like to invest?
- How liquid can your portfolio have to be
- Your retirement age
- Where to store precious metals
- Your income level
- Current savings rate
- Your future goals
- Your net worth
- Special circumstances that may influence your decision
- Your financial overall situation
- You choose between paper and tangible assets
- Your willingness to take on risks
- Your ability manage losses
- Your budget constraints
- Your desire to be financially independent
- Your investment experience
- Your familiarity with precious and rare metals
- Your knowledge of precious Metals
- Your confidence with the economy
- Your personal preferences
Once you've chosen the right type of precious Metal IRA to suit your needs, it is time to open a dealer account. You can find these companies through referrals, word of mouth, or online research.
After opening your precious metal IRA you will need to decide how big you want it to be. Each precious metal IRA account requires a minimum initial deposit. Some accounts only require $100, while others may allow you up to $50,000.
As mentioned above, you can decide how much money you want to invest in your precious metal IRA. You might choose to make a larger initial investment if your goal is to build wealth over the long-term. You might prefer a lower initial deposit if you intend to invest smaller amounts every month.
You can buy any type of investment, regardless of the amount of precious metals in your IRA. The most common include:
- Bullion bars. Rounds, and gold coins.
- Silver – Rounds and coins
- Platinum – Coins
- Palladium Round and Bar Forms
- Mercury – Round and bar forms
—————————————————————————————————————————————————————————————-
By: Jamie Redman
Title: The Decline of Bitcoin-to-Gold Ratio: Is Gold Outshining Bitcoin?
Sourced From: news.bitcoin.com/commodity-analyst-mike-mcglone-says-gold-glitters-over-bitcoin-as-crypto-to-metal-ratio-plunges-post-2021/
Published Date: Sun, 04 Feb 2024 22:30:21 +0000
