Jerome Powell

Gold

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<p class="has-drop-cap">Ahead of the Federal Reserve’s interest rate cut in September by 50 basis points, to a new 4.75% – 5% range, the stock market experienced volatility. This was to be expected, as it is embedded into the policy shift that the economy needs a boost with cheaper capital and looser financial conditions.&nbsp;</p>
<p>But heading into 2025, is a global economic downturn likely? Last week, the International Monetary Fund (IMF) <a href="https://www.imf.org/en/Blogs/Articles/2024/10/22/global-financial-fragilities-mount-despite-rate-cuts-and-buoyant-markets" target="_blank" aria-label=" (opens in a new tab)" rel="noopener noreferrer nofollow" class="deco-link">warned</a> that “with monetary policy easing, risk-taking by investors could increase”. In turn, this could create pockets of unpredictable fragility.</p>
<p>Yet, following the stock sell-offs due to the unwinding of yen <a href="https://tokenist.com/investing/carry-trade/" rel="noopener noreferrer nofollow" class="deco-link">carry trades</a>, the US stock market once again showed exceptional resilience. Over a 3-month period, S&amp;P 500 is up 6.8%, entrenching the US stock market as global safe haven, now amplified by the Fed’s monetary shift.</p>
<p>This spilled over the utilities (up 18.55%), real estate (up 16.30%), industrials (up 11.13%, financials (up 10.24%) and even consumer discretionary (up 9.85%) for Q3. Representing global equity coverage, but excluding the US and Canada, the MSCI EAFE Index was up 6.65% during the period.&nbsp;</p>
<p>The question is whether this upward trend is sustainable enough to drive up the three commodities: oil, gold, and Bitcoin?</p>
<h3 id="oil-is-flatlining-ytd-brent-crude-oil-forecast-downgraded">Oil is Flatlining YTD, Brent Crude Oil Forecast Downgraded</h3>
<p>At present, Brent crude is $75.91 per barrel, returning to early October level. This marks nearly 7% downward performance in the last three months, but effectively flatlining year-to-date. In its October Short-Term Energy Outlook (STEO), the Energy Information Administration (EIA) downgraded Brent crude oil forecast by the end of 2025.</p>
<p>The agency placed the average Brent crude oil price at $78 per barrel (bbl) during the year, which is down $7/bbl from the September forecast.</p>
<p>EIA attributed the downgrade to lower demand in OECD nations, with global oil consumption expected to increase by 1.3 million b/d (barrels per day) in 2025 vs the 900,000 b/d increase in 2024. The caveat is that China could introduce more aggressive stimulus measures beyond <a href="https://tokenist.com/3-stocks-that-can-gain-from-chinas-stimulus-plans/" rel="noopener noreferrer nofollow" class="deco-link">monetary easements</a>.&nbsp;</p>
<p>Moreover, it is unknown if the Middle East conflict will result in greater escalation after the US presidential elections in November. In that scenario, oil prices are likely to surge short-term. But in the absence of a broader regional conflict, oil prices should remain stable.</p>
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<h3 id="gold-continues-to-breach-new-all-time-highs">Gold Continues to Breach New All-Time Highs</h3>
<p>Gold continues to breach new all-time highs, now at $2,768 per ounce, marking a 34% year-to-date performance. The demand for gold mirrors the growingly unsustainable debt levels of USG. Also breaking new records, the national debt of the US government is now at <a href="https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/" target="_blank" aria-label=" (opens in a new tab)" rel="noopener noreferrer nofollow" class="deco-link">$35.81 trillion</a>.&nbsp;</p>
<p>Just in the last three months, this marks a debt ballooning worth $850 billion. For comparison, the entire cost of banking bailouts during the Great Financial Crisis (GFC) of 2008 was estimated at $498 billion.</p>
<p>Conversely, such a trend implies that USD will continue to lose value as the Federal Reserve has to keep monetizing debt by increasing the money supply. In early July, the current Fed Chair Jerome Powell warned that “The level of debt we have is completely sustainable, but the path we are on is unsustainable”.</p>
<p>At that point, the total outstanding debt was $34.87 trillion. Given that the Federal Reserve is effectively the world’s central bank, other central banks have continued to rapidly expand their gold holdings throughout 2024. For Q2, the World Gold Council estimated 183 tonnes of gold accumulation, representing a 6% year-over-year increase.</p>
<p>At the end of September, Goldman Sachs raised the gold price forecast from $2,700 to $2,900 per ounce heading into early 2025. The bank emphasized that global financial institutions will continue to hedge against geopolitical and financial uncertainty.</p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe>
<h3 id="bitcoin-remains-a-strong-hedge-against-fiat-currency-devaluation">Bitcoin Remains a Strong Hedge Against Fiat Currency Devaluation</h3>
<p>Just like gold, Bitcoin is a hedge against the fiat currency devaluation, but in the digital realm backed by computing power and energy assets. It is a testament to Bitcoin’s fundamentals that <a href="https://tokenist.com/is-mstr-stock-still-a-buy-as-it-builds-a-massive-bitcoin-pile/" rel="noopener noreferrer nofollow" class="deco-link">MicroStrategy</a> (NASDAQ: MSTR) boosted its stock 280% year-to-date vs Bitcoin itself at 61% for the same period.</p>
<p>After exiting the overleveraged period in 2022, culminating in FTX cryptocurrency, Bitcoin is now viewed apart from the crypto sphere. This was bolstered by the unprecedented success of BTC ETFs launch, having cumulatively attracted <a href="https://www.coinglass.com/bitcoin-etf" target="_blank" aria-label=" (opens in a new tab)" rel="noopener noreferrer nofollow" class="deco-link">$52.11 billion</a> worth of capital throughout the year.&nbsp;</p>
<p>After April’s fourth halving, Bitcoin’s inflation rate was cut in half, now at 0.84%. For comparison, the Fed’s ideal inflation rate target for USD is 2%. Depending on the US presidential elections outcome, Bitcoin price is likely to reach a new all-time high if former President Trump gets his second term, given his talk of positioning the US as the “Bitcoin superpower” at the Bitcoin 2024 conference in Nashville.</p>
<p>But regardless of election results, the massive USG spending sprees are exceedingly likely to continue, making Bitcoin an exit ramp amid financial uncertainty and mathematically guaranteed scarcity (unlike gold).&nbsp;</p>
<p>At present, <a href="https://studio.glassnode.com/workbench/btc-realizedprice-mvrv" target="_blank" aria-label=" (opens in a new tab)" rel="noopener noreferrer nofollow" class="deco-link">Bitcoin network’s cost basis</a> increased from $26k to $33k this year. This is the average price at which people bought BTC. But considering that Bitcoin’s present spot price of $72.8k hasn’t changed that much from the beginning of the year, the multiple of ~2x now vs ~4x in 2021 is more conducive to greater price growth heading into 2025.&nbsp;</p>
<p><strong><em>Although it is digital in nature, do you consider Bitcoin a hard asset like gold because of its proof-of-work algorithm that requires hard assets? Let us know in the comments below.</em></strong></p>
<p><em>Disclaimer: The author does not hold or have a position in any securities discussed in the article.</em></p>
<p>The post <a rel="noopener noreferrer nofollow" href="https://tokenist.com/macro-digest-oil-bitcoin-and-gold-trends-explained/">Macro Digest: Oil, Bitcoin, and Gold Trends Explained</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://tokenist.com">Tokenist</a>.</p>

Macro Digest: Oil, Bitcoin, and Gold Trends Explained

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