Bitcoin and gold are volatile and the future is not optimistic

The Federal Reserve decided to raise interest rates in December last year, and the trend of international gold prices is not optimistic; the US December employment data was relatively warm, and factors such as rising wages and salaries are not conducive to the strengthening of gold prices.

Bitcoin is obviously affected by policy factors. Under the current background of my country's strengthening of capital controls and preventing capital outflow, it is difficult for Bitcoin to maintain its previous appreciation speed.

The shocking fluctuation of RMB in the first week of the new year depicted the first close-up of the market in 2017. Safe-haven assets received special attention. In addition to traditional gold, the recent rapid rise of Bitcoin also attracted a lot of attention. However, analysts believe that both gold and Bitcoin are currently facing unfavorable factors, and the future trend is not optimistic.

Shanghai gold price rises faster than international gold price

In the first week of 2017, the international gold price rose by 1.9% to $1,172.9, the highest price since December 9 last year. It is worth noting that due to the depreciation of the RMB, the domestic gold price rose more strongly than the international gold price. In 2016, the London gold price rose by 8.48%, while the Shanghai Gold Exchange gold price rose by 18.54% in the same year. Even if the RMB depreciated by 6.49% during the same period is taken into account, Shanghai gold still has a significant premium over London gold.

In fact, under the premise of capital control, buying gold is equivalent to buying US dollars in a sense. The price of gold is denominated in US dollars, and the increase in gold denominated in RMB has already included the increase in US dollars. Since December last year, the premium of Shanghai gold to London gold has remained above US$30, the largest gap since 2013, as the weakening of the RMB has stimulated the demand for risk aversion.

However, affected by the US interest rate hike decision in December last year, the international gold price trend is not optimistic. In 2016, gold formed an inverted V-shaped trend. After hitting a high of $1,377 in July, the price began to gradually decline, especially after Trump won the US election. The gold price fell rapidly and did not rebound until late December. The latest US December employment data released last Friday was warmer, and the increase in wages and salaries also hit a new high since 2009. These are not conducive to the strengthening of gold prices. The market expects that gold will not rise sharply.

The more optimistic Royal Bank of Canada believes that the price of gold fell sharply in the fourth quarter of 2016, and there may be a seasonal price rebound in January and February this year. It is now close to the buying point of gold, but investors are not encouraged to be overly optimistic. It is expected that the price of gold may increase by 6% to US$1,245 in 2017, and may reach US$1,300 in 2018.

Bitcoin surge draws regulatory attention

Since the second half of 2015, Bitcoin has become one of the important tools for domestic investors to hedge against the depreciation of the RMB. Recently, the trend of Bitcoin and RMB has shown a clear inverse relationship, and the appreciation rate of Bitcoin is much faster than the depreciation rate of RMB. As an emerging electronic currency, Bitcoin can be purchased domestically by investors and sold on overseas electronic exchanges and exchanged for foreign currencies. Due to its anonymity and convenience, it is difficult for central banks of various countries to regulate it, and it has become a means of evading capital controls.

Affected by the above factors, the price of Bitcoin soared by 43% in the second half of 2016 alone. The last time Bitcoin reached a high point was in 2013, when Bitcoin transactions were tightened and the currency value began to fall sharply. Later, as the pressure on the depreciation of the RMB increased, Bitcoin gradually began to become the darling of hedging against depreciation risks. The price of Bitcoin once rose by more than 8,000 yuan, reaching a high of 8,896 yuan on January 5, which has exceeded the US dollar price of one ounce of gold.

However, after hitting a recent high last Thursday, Bitcoin fell 17% due to the sharp rise in the RMB. After the central bank warned Bitcoin investors to be cautious and remain rational, Bitcoin fell 12% last Friday, with a cumulative drop of 27% in two days. Bitcoin has fallen 5% since entering 2017, and the price of a single Bitcoin remains around 6,500 RMB.

Bitcoin is also affected by international political and economic events. The recent banknote abolition in India and Venezuela, the US election and Brexit have increased the demand for Bitcoin as a safe haven. At the same time, Bitcoin transactions are mainly concentrated in China. Data shows that 98% of Bitcoin transactions in the past six months have been in RMB.

Bitcoin is obviously affected by policy factors. Under the current background of my country's strengthening of capital control and preventing capital outflow, Bitcoin may still have room for growth, but it may be difficult to maintain the previous appreciation rate. Market analysts believe that due to the natural decentralization and anonymity of Bitcoin, the current regulatory measures only control domestic online trading platforms. If the supervision is strengthened or even the trading is shut down, Bitcoin itself will not disappear or turn to underground trading, which will make investment and supervision more troublesome. In the end, the price of Bitcoin still depends on the strength of demand for investment, speculation or evasion of capital supervision.

However, regulation will still have a significant impact on Bitcoin's liquidity, amplifying the impact of demand on prices. The current Bitcoin market, which is worth around 100 billion yuan, is still a very alternative asset that does not have the endorsement of the government.

Citigroup analyst Englander Enland believes that regulators may suppress Bitcoin as a tool for capital flight. The worst result is poor liquidity, increased transaction costs, and any change in demand may have a huge impact on prices. Bitcoin China, one of the largest Bitcoin trading platforms in China, said after a regulatory interview that institutional and individual investors should have a correct view of virtual goods and virtual currencies, invest rationally, bear their own risks, maintain their own property security, and establish correct monetary concepts and investment concepts.