Since its introduction to the global market, cryptocurrency (and in particular Bitcoin) has outperformed gold by far. Currently, the precious metal is down by roughly 4% while this digital coin has risen by about 133%. Some analysts believe that investors may be opting for this digital currency over the yellow metal as a hedge against increasing inflation. However, the chief gold strategist at State Street’s SPDR ETFs, George Milling-Stanley, disagrees with this.
In a recent interview with the ETF Edge on CNBC, the strategist stated that the digital currency and gold could co-exist without friction in the market as they played different roles. SPDR Gold Trust is the biggest gold-backed exchange traded fund globally. This ETF will be entering its 17th year in the public markets on November 18. Since it was launched in 2004, the exchange traded fund had risen by more than 280% but dropped by about 4.5% this year.
Milling-Stanley explained that investors mainly went for the yellow metal because it could help decrease volatility while also improving their returns over the long term. Gold has, historically speaking, helped improve risk-adjusted return over long periods of time, while digital currencies increase volatility, carry significantly higher risk and make returns that are influenced by their swings in the short-term.
The strategist noted that this was why lasting inflation would probably make gold the more favorable option. He added that the precious metal was a good preserver of purchasing power, especially during periods of high inflation, which in this case refers to a number of months with inflation at more than 5% annually.
Milling-Stanley then argued that given that inflation had only been around for a couple of months and was termed as transitory by the Fed, it wasn’t surprising that the yellow metal hadn’t responded to the inflation numbers.
In the same interview, the CEO and founder of GraniteShares Gold Trust Will Rhind stated that while digital assets such as Bitcoin were currently diverting capital away from gold, it was too early to tell if that was because they could hedge against inflation successfully. GraniteShares, which has also dropped by about 4% this year, is the fifth largest gold exchange traded fund on the market by assets under management.
Rhind explains that the reason that more individuals were purchasing cryptocurrencies such as Bitcoin at present was speculative, noting that the performance of gold was on the other hand based on inflation rates as well as on purchasing power or the long-term preservation of capital.
Given the solid history of the performance of gold as a hedge against inflation, there is no indicator that public confidence in the shiny metal is likely to wane soon, so precious metals companies such as Asia Broadband Inc. (OTC: AABB) still have a huge market to serve for decades to come.
NOTE TO INVESTORS: The latest news and updates relating to Asia Broadband Inc. (OTC: AABB) are available in the company’s newsroom at https://ibn.fm/AABB
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