Bitcoin's Disappointing Performance Against Gold
Commodity market expert Mike McGlone from Bloomberg raises concerns about the potential downturn of Bitcoin, highlighting its underwhelming performance compared to gold since its peak in 2021. On Sunday, McGlone pointed out that the ratio between Bitcoin and gold had dropped by approximately 40% from its highest point of 37 times in 2021.
McGlone's Warning on Bitcoin-to-Gold Ratio
Mike McGlone, a commodity analyst at Bloomberg, emphasizes that Bitcoin (BTC) has failed to match the performance of gold since its peak in 2021. On Sunday, McGlone provided his latest evaluation of various commodities, including Bitcoin, in his analysis. He wrote, "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 added:
"My graphic shows two previous chart holes since 2017 that were subsequently filled. What's notable is the bitcoin-to-gold ratio, which has a tendency to lead beta, has been trailing since the biggest money pump in history to the 2021 high. The 24-7 traded highly speculative digital asset might be a top leading indicator and equivalent to about 21 ounces of gold on Jan. 2. The ratio is about 40% below the 37x 2021 apex."
McGlone's insights on this matter are not new; he previously discussed the bitcoin-to-gold ratio on Jan. 23, 2024. McGlone suggested that Bitcoin's underperformance compared to gold, despite the strong performance of the U.S. stock market since 2021, could indicate either an opportunity for Bitcoin to catch up or a sign of a recession. He leans towards the possibility of a recession and highlights concerns if the Bitcoin/gold ratio continues to decline.
This shift 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 the Federal Reserve at 5.58, the landscape has changed, affecting assets like gold and Bitcoin that do not generate earnings or interest, making them less attractive in portfolios. McGlone stated, "The crypto exchange-traded fund frenzy might be looked back upon as a bell ringing at the top."
What are your thoughts on McGlone's analysis of the bitcoin-to-gold ratio? Share your opinions in the comments section below.
Frequently Asked Questions
How to Open a Precious Metal IRA
The best way to open an IRA for precious metals is by opening a self-directed Roth Individual Retirement Account (IRA).
This account is more advantageous than other types of IRAs, because you don’t have to pay taxes on any interest earned from your investments until they are withdrawn.
People who are looking to save money and still need a tax break will find it attractive.
You are not limited to investing in gold or silver. You can invest in anything you want if it fits the IRS guidelines.
Many people think only of silver and gold when they hear the word “precious metallic” but there are other types.
There are many examples: palladium; platinum; rhodium; osmium; iridium; 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 and Bars
One of the most straightforward ways to invest is to buy bullion coin and bars. Bullion is a general term that refers to physical ounces of gold and silver.
When you buy bullion coins and bars, you receive actual pieces of the metal itself.
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.
This is an example of a tangible piece in history. Each coin and bar is unique.
If you compare the nominal value to face value, you will often find that it is worth much less than its nominal. In 1986, the American Eagle Silver Coin was $1.00 per ounce. However, today, an American Eagle Silver Coin is more than $40.00 per Ounce.
Bullion's price has risen dramatically since its inception, so many investors would rather invest in bullion coins than futures.
Mining Companies
If you are looking to invest in precious metals, there is another option: investing in mining shares. When you invest in mining companies, you are investing in the company's ability to produce gold and silver.
You will be paid dividends that are based on the company’s profits. These dividends are then used to pay shareholders.
Furthermore, the company has the potential to grow. The demand for the product will also cause an increase in share prices.
This is why it's important that you diversify your portfolio. Stocks can fluctuate in prices so it's important to diversify. This means you can spread your risk to multiple companies.
However, mining companies are not immune to financial loss just like any stock-market investment.
If gold prices plummet significantly, ownership of your shares could be worthless.
The Bottom Line
Precious metals, such as silver and gold, can be a refuge during economic uncertainty.
Both silver and gold are subject to extreme price swings. If you're interested in making a long-term investment in precious metals, consider opening up a precious metals IRA account with a reputable firm.
By doing this, you can reap the tax benefits and still have physical assets.
Is it possible to hold precious metals in an IRA
The answer to this question depends on whether the IRA owner wants to diversify his holdings into gold and silver or keep them for safekeeping.
He can choose to diversify if he so desires. He could either buy physical bars of silver and gold from a dealer, or he could sell the items to the dealer at year's end. However, suppose he isn't interested in selling back his precious metal investments. In that case, he should continue holding onto them as they would be perfectly suitable for storing within an IRA account.
Are gold IRAs a good option for investment?
An investment in gold can be made by buying shares of companies that mine it. These companies are a great way to make money investing in precious metals like gold.
However, there are two drawbacks to owning shares directly:
Holding on to your stock for too many years can lead you to losing money. Stocks can fall more than their underlying asset (like, gold) when they decline. This means that you might end up losing more money than you make.
Second, you may miss out on potential profits if you wait until the market recovers before selling. You may have to wait for the market to recover before you can make a profit on your gold holdings.
Physical gold can be beneficial if you prefer to keep investments separate from your finances. An IRA with gold can diversify and protect your portfolio against inflation.
Visit our website to learn more about gold investment.
How does an IRA for gold and/or silver work?
A gold and silver IRA allows you to invest in precious metals, such as gold and silver, without paying taxes on any gains. They make a great investment choice for those looking to diversify.
If you are above 59 1/2 years old, you do not have income tax to pay on the interest earned. The appreciation of the account's value does not trigger capital gains tax. However, there are limitations on how much money you can put into this type of account. Minimum amount allowed is $10,000 You cannot invest at all if you are under age 59 1/2. The maximum annual contribution is $5,500.
You may not receive the entire amount if you pass away before retirement. Your estate should contain sufficient assets to cover your account's remaining balance after paying any other expenses.
Some banks offer a gold or silver IRA option, while others require that you open a regular brokerage account where you can buy certificates or shares.
How much are gold IRA fees?
The average annual fee of an individual retirement account is $1,000. However, there are many different types of IRAs, such as traditional, Roth, SEP-IRAs, and SIMPLE IRAs. Each type of IRA has its own rules and requirements. If you don't have tax-deferred investments, then earnings may need to be taxed. The amount of time you intend to keep the money must be considered. If you are planning to hold onto your money for a longer time, you will likely save more money opening a Traditional IRA than a Roth IRA.
A traditional IRA allows you to contribute up to $5,500 per year ($6,500 if you're 50 or older). The Roth IRA allows unlimited contributions each year. The difference between them? With a traditional IRA, the money can be withdrawn at your retirement without tax. A Roth IRA will entail taxes for any withdrawals.
Can I store my gold IRA account at home?
An online brokerage account will allow you to invest in the most secure way possible. You have all the investment options you'd get if you had a traditional broker. However, you don't require any licenses or qualifications. You don't have to pay any fees for investing.
Many online brokers also offer tools that can help you manage your portfolio. Many online brokers allow you to download charts that will show how your investments are performing.
Is it possible to take physical ownership of gold from my IRA
Many people ask themselves whether it is possible to physically own gold in an IRA. This is a valid question as there is no legal route to it.
But when you look closely at the law, nothing stops you from owning gold in an IRA.
Most people don't realize the cost savings they could make by putting their gold into an IRA rather than keeping it in their homes.
It's simple to throw out gold coins but difficult to put them into an IRA. If you decide not to keep your golden in your home, you'll need to pay twice tax. One for the IRS, and one for your state.
It is possible to lose your gold and pay twice as much tax. So why would anyone want to keep their gold in their home?
You may argue that it is necessary to have the assurance that your gold safe in your home. But to protect yourself against theft, you should consider storing your gold somewhere more secure.
If you're planning on visiting frequently, it is best to keep your gold safe at home. If you leave your precious gold unattended thieves will easily steal it.
Better yet, store your gold inside an insured vault. This will ensure that your gold is protected against fire, flood, earthquake and robbery.
Another advantage to storing your gold in a vault is that you won't have to worry about paying property tax. Instead, you will have to pay income tax for any gains you make selling your gold.
A IRA can be a great option if you want to avoid paying tax on your gold. You won't be subject to income tax if you earn interest from your gold with an IRA.
Capital gains tax is not required on gold. If you decide to cash it out, you will have full access to its value.
And since IRAs are federally regulated, you won't have any trouble getting your gold transferred to another bank if you move.
The bottom line is that you can own gold in your IRA. Fear of losing it is the only thing that will hold you back.
Statistics
- 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)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal so that you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.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)
- You can only purchase gold bars of at least 99.5% purity. (forbes.com)
External Links
wsj.com
takemetothesite.com
en.wikipedia.org
forbes.com
- Gold IRA: Add some sparkle to your retirement nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
How To
Best Precious Metals Ira in 2022: Things to Remember
Precious Metals Ira ranks high among investors as one of their most popular investment options. This article will teach you what makes precious metals so attractive, and how to make informed decisions about investing in precious materials.
The main attraction of these assets is their long-term growth potential. Looking back at historical data, we see that gold prices have shown incredible returns. Gold prices have increased by almost $1900 per troy ounce in the past 200 year, from $20 an ounce to nearly $1900 over that time. In comparison, the S&P 500 Index only grew by around 50%.
When economic uncertainty is high, gold can be considered a reliable financial asset. People tend to sell stocks when the stock market is in trouble and shift into gold for safety. As an inflation hedge, gold is also thought to be a good investment. Many economists believe there will always be inflation. Therefore, they see owning physical gold as a way to protect your savings from future price increases.
You should be careful before you purchase precious metals such as palladium, gold, platinum or silver. First, decide whether bullion bars are better than coins. Bullion bars are usually bought in large quantities (like 100 ounces) and stored away until needed. Bullion bars are often replaced by coins, which can be used to buy smaller amounts of bullion.
Second, you should consider where you plan to store your precious metals. Certain countries are more secure than others. For example, you might consider storing precious metals overseas if your home country is the United States. But if you're planning on storing them in Switzerland, you might want to ask yourself why.
Finally, decide whether you want investment in precious metals directly (or through precious metals exchange traded funds) (ETFs). ETFs can be financial instruments that track different commodities' performance, such as gold. You can use them to get exposure without actually owning precious metals.
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