There is room for Gold and Crypto’s because they are so different, but the most overriding factor…
I hope you like the layout of my updated, segmented blog – it stays faithful to the original themes of precious metals fundamentals via ‘Trader’s corner’; charting with ‘The Charting Centre’; the psychological factors of trading via ‘Psycho City’; the odd outpouring of views on the madness of the world we live in via ‘Rantsville’ and maybe some smiles whilst visiting ‘Amusadelphia’.
Hop on board everyone and enjoy the ride, we are on a whistle stop tour of all the ‘flations’ in 2021. You have all been fortunate to experience reduced packaging and food content with shrinkflation and the amazing sight of rising prices with inflation. But the journey does not end there. No Sir, whilst our trusted, friendly central bankers warned us that rising prices would only be transitory, I am delighted to unveil our final destination. Welcome to sovereign debtflation land, a perfect mix of rising country debts, currency deflation and precious metals inflation. Enjoy your stay!
It has been a 2-horse race in May between inflation and cryptocurrencies as to which has the biggest impact on precious metal prices.
Since launching in 2009, I have turned a blind eye to Bitcoin and the growing breed of cryptocurrencies. Viewing them initially as a popular fad, I thought the embers would burn out years ago but here we are in 2021 and we have 18.6 million bitcoins in circulation with a total market cap of around $927 billion and thousands of cryptocurrencies such as Litecoin and Ethereum which boast a market cap, of more than $1.5 trillion. So, I spent a day last week researching soft forks, hard forks, blockchain, nodes and sighashing algorithms and deciphering Bitcoin classic, Bitcoin cash, Dash, ZCash and Dogecoin to see if I was missing a trick. It felt like a had learnt a new language, Cryptonese, and no wonder I was confused. Are cryptocurrencies competing with the multiple versions of Coca Cola and dare I say Covid, for the Guinness World book of records for variants? It was at the 5-hour point, whilst trying to get my head round atomic swaps using the lightning network, when my eyes started to glaze over and I nodded off, much like readers to my last blog.
But fundamentally I do get it. Minting new bitcoins is like the process of extracting precious metals. Virtual money mined by electricity and the processing chip in a computer versus real money mined via a rotary drilling tool. Virtual money that avoids the divulging of credit card details, bank or credit card company involvement, currency conversions and theoretically immune to government interference or manipulation. Designed to be finite, even the threat of inflation is limited with Bitcoin. Benefits aplenty and endorsed by Elon Musk, what can go wrong?
Well, firstly, just as soon as Musk endorses Bitcoin, he has a change of heart, citing the environmental case against it and tweeting about the insane electricity consumption. In today’s modern world, reducing carbon footprints is as important as equality, diversity, and inclusion. It was recently estimated that the energy used by the Bitcoin network was about the same annual usage as the whole of Norway, at around 100 terawatts. A substantial footprint, and it is questionable whether the price is directly correlated with its mining costs?
For anyone who remembers the Krypton Factor (a British gameshow from the 70’s through to the 90’s), it involved contestants completing a series of rounds that tested physical stamina and mental resilience. Attributes that naïve Kryptonites have required in abundance, when looking at the performance of their cryptocurrencies in the last few weeks. Bitcoin has experienced some rapid surges and collapses in value, and it is not uncommon for it to suffer crashes of 20% – 40% and multiple single day moves of 20%. It is setting new standards in pumping and dumping and when I hear naïve amateur investors, making and losing millions, my risk radar is elevated to a heightened level.
So, why am I reading so much about the Gold price being impacted when traders are going into and then out of cryptocurrencies? That is an interesting question. One is real and one is virtual. One is a speculative asset, and one is a safe-haven, insurance policy. One has been around for thousands of years, and one is just over 10 years old. Well, very simply, it is the flow of money. Musk tweets positively about crypto’s and speculative money flows from Gold and other asset classes, sending Gold prices down and when he changes his mind, money flows in the reverse direction. Mark Cuban’s involvement with Polygon will no doubt have the same impact.
Regardless of the benefits and performance issues, I believe there is room for Gold and Crypto’s because they are so different, but the most overriding factor affecting Crypto’s future is not Musk’s bipolar tweets, but World Government policy. Do you honestly believe that Government’s appetite to control money and people will not at some stage turn its hunger to such a potentially rich source of taxes and control? They will always see us as sheep and the sector will see regulatory rule after regulatory rule introduced to ensure the status quo is maintained. Terrorism and money laundering will be used as a side bar conversation to convince us, but they do not want a de-centralised payment network that avoids capital controls and their ability to tax everything that moves. It has taken them hundreds of years to rip us all off, why should they relinquish the cash cow now? The current system has evolved to divide us so they benefit, not to unite us, so a truly united, de-centralised currency method will never be allowed to survive for long. The recent Chinese crackdown is evidence of all this. Get your tickets, the MGM in Vegas will soon be hosting the great 21st century unification bout amongst all crypto heavyweights and the survivor will be Government funded and backed. It will continue to be an overly inflated and overly deflated balloon until then, and so I am avoiding it.
The Charting Centre
Butt clenching March, hopeful April and profitable May are the best ways I can describe the last 3 months, from a trading perspective. March represented the ‘buying at Fibonacci retracement levels as we fall’ mentality; April represented the ‘be patient and do I take profit?’ conundrum and May represented the ‘Yes, I am going to take profit, but should I now reinvest because the market is continuing to climb?’ puzzle. The perpetual battle between fear and greed. A daily journal recognising and capturing my emotional thoughts on the markets is therefore a great tool to use. With a $1765 – $1900 range in Gold and a $2590 – $2875 range in Silver, May has proven to be a profitable month, but only because I exercised courage in March, patience in April and a profit-taking mentality in May.
For June, and from a short-term trading perspective only, I would like to see Gold pull back part of the move from $1675 to $1900 to the Fib retracement levels of $1837, $1807, $1782, and $1757, so greedily, I can make the same profit again. But from a medium to long term perspective, I am happy if the rockets ignited now and went straight up.
My psychological experience of trading over the last 18 months and blogging over the last 2 months has been an interesting journey and one where I am constantly learning. ‘Journaling’ my views and thoughts on the markets I trade in and sprinkling this with a bit of humour, that I feel, is sadly lacking these days, is my way of making sense of the mad world I live in. Getting published on websites has been a definite high and sharing these platforms with commentators that I have followed for years has been brilliant. I am thrilled at seeing my blog being read all over the world. It is not a monetary thing because I am not monetising my blog and it is not an ego thing because I am not doing it for likes or numbers.
But there are ‘darker-sides’ to doing anything new. You may not get the level of support you expect, and reactions may be encouraging or disheartening. Family and friends may not understand or get what you are doing and simply do not have the capacity to invest their own time or have the appetite ‘to get it’ and encourage you. I have been guilty of that myself with others.
I have seen many writers receive awful responses to their articles on a consistent basis and I have always wondered how they deal with them and carry on but carry on they do. My last blog received some negative comments about it being ‘worthless rhetoric’; me ‘having a multiple personality disorder’ and that ‘I was in my 40’s and living with my Mum’. Well, my Mum died over 20 years ago and if you think I am in my 40’s, I will take that as a compliment. I will ask my inner self if I have a multiple personality disorder when I see him next week. Another sarcastically and arrogantly suggested I was a ‘smart-guy’, because I had included a manipulated, paper-derivative chart. He has no idea of where I have money invested but I do have a small percentage sitting in spread-betting accounts for short-term trading, and I simply like the charts they use. There are multiple ways of making money in these markets.
Overall, entertaining comments to be honest. A less assured, self-doubtful person in their 40’s may well take a lack of support and these comments to heart, but I would like to say thank you to these people because there is a kernel of truth to what they have said and it has driven me on to persevere with improving the quality of the blog on a monthly rather than weekly basis; reminded me that I am writing for me not them and to re-structure it so that the ‘worthless rhetoric’ sits in a section of its own. I read somewhere that when you get your 1st negative comment, you open a bottle of champagne because it means someone besides your wife is reading it. The truth is that thousands read it and only a few negatively comment, and if you read their comment history, you will soon see they are experts at negative comments.
In a similar vein, Matthew Perry, following the Friends Reunion has received unfair, online social media vitriol and after Manchester United’s defeat in last week’s Europa League final, Marcus Rashford was subject to a tidal wave of online racial abuse, which is awful but unfortunately indicative of the world we live in. For anyone out there who is doing something they enjoy or something new, my advice will always be carry on regardless. Life is short and you only live once. Ignore the negativity from those stuck in their own quagmire, or the perceived critical silence of others, and plough your own field. If you do, you will be surprised what grows for you.
Spare a thought for Canadian MP, William Amos, who, a month ago, appeared naked on an internal parliamentary feed, with only a mobile phone preserving his modesty. Well, he has been caught out again, by urinating while attending virtual proceedings. That guy really is taking the piss.
British Politics. I think those 2 words in themselves are enough to amuse me, but the month of May has certainly witnessed a new high in pantomime farce as far as our trusted Government ministers and advisers are concerned. It is not often you have more than one evil character to jeer and boo but we are blessed with Dominic Cummings as Captain Hook, Matt Hancock as Cruella De Vil and Boris Johnson as the wicked Queen, all vying for premier evil villain status. Pantomime season has started early but I can assure you that it will last until December and beyond. Trust none of them; vote for none of them.
Stay safe and see you next month. I am Sheep Shearer and I shear sheep.