Gold and Bitcoin rally simultaneously on expectations of interest rate cut

Bitcoin continues its upward trend for one year after the previous halving

As gold and Bitcoin continue to be extremely strong at the same time, interest in the market is focused on how far the two assets will rise. On December 3 (local time), the price of gold futures for delivery in February of next year closed at $2,136 per ounce (about 2,821,230 won), hitting an all-time high (see Graph 1). The previous highest price was $2,072.5 (about 2,737,360 won) on August 7, 2020 during the COVID-19 pandemic, exceeding the previous highest price in about 3 years and 4 months. On this day, spot gold in the Korea Exchange (KRX) gold market also hit an all-time high of 87,300 won per gram. Bitcoin, called digital gold, recorded an intraday price of 61.312 million won in the domestic market on December 6, exceeding 60 million won in two years since December 28, 2021 (see Graph 2). On this day, Bitcoin exceeded $44,000 (about 58.3 million won) in the global market.

Gold price likely to continue strong

The reason for the rally of the two assets is the preference for safe assets due to concerns about economic recession and geopolitical instability. The international price of gold began to soar as investment sentiment turned to safe assets after Hamas invaded Israel on October 7. In addition, expectations of a recent interest rate cut were added, leading to a super bullish phenomenon. On December 1, when Jerome Powell, Chairman of the U.S. Federal Reserve, said in a speech at Spelman University in Atlanta, “Policy has entered a restrictive zone” and “inflation is close to balance,” expectations of an interest rate cut increased and the interest rate soared to an all-time high. Experts predict that if the interest rate cut becomes a reality next year, the price of gold may rise further due to the weakening dollar. Oh Jae-young, a researcher at KB Securities, said, “Gold prices are rising due to expectations of a U.S. interest rate cut in the first half of next year. Considering that the price of gold rose 25% per year during the interest rate cut period after the economic recession in 2008 and 2020, it is expected to rise up to $2,550 per ounce (approximately) next year. “It could rise to 3,368,290 won,” he predicted. Park Sang-hyeon, a researcher at Hi Investment & Securities, said, “It is unclear whether the price of gold will continue its super rally and exceed $2,500 per ounce, but it is expected to remain bullish in the short term.” He added, “With the risk of a US recession not being resolved, concerns about the US government’s debt expansion, and China’s “It is highly likely that the strength of gold prices will continue due to the selling of U.S. Treasury bonds and the buying of dollars,” he explained.

Global experts’ positive outlook for gold prices continues. Bart Melek, head of product strategy at TD Securities, said, “The strong buying power of central banks around the world will serve as a major catalyst for price increases,” and predicted, “The average price of gold in the second quarter of next year will be $2,100 (about 2,774,310 won).” did. Heng Kun How, head of market strategy at Singapore Bank (UOB), said, “The prospect of interest rates falling next year is a positive factor for the rise in gold prices,” and predicted, “The price of gold at the end of next year could rise up to $2,200 (about 2,906,420 won) per ounce.”

On the other hand, some predict that the rise in gold prices will be limited. Yeosam Yoon, a researcher at Meritz Securities, said, “For gold prices to show additional strength, economic slowdown pressure that exceeds expectations of interest rate cuts is needed. Gold prices can rise further only when expectations for an aggressive interest rate cut arise and the dollar weakens in earnest, but that is not currently possible. “It is limited,” he analyzed.

Bitcoin’s highest price forecast for next year

The Bitcoin rally, which began with optimism about the Bitcoin spot exchange-traded fund (ETF), is expected to continue further. Markus Thielen, senior researcher at Matrixport, a virtual asset service company, predicted, “If Bitcoin holds a year-end Santa rally, it could rise to $56,000 (about 74 million won).” There are also predictions that if the Bitcoin spot ETF is approved, Bitcoin will hit a record high. Michael Novogratz, CEO of Galaxy Digital, predicted in an interview with Bloomberg, “Once the Bitcoin spot ETF is launched, billions of dollars will flow in and Bitcoin will hit its highest point next year.” Kim Il-hyuk, a researcher at KB Securities, said, “Next year’s Bitcoin halving is already a predicted schedule, but if it coincides with the launch of a Bitcoin spot ETF, Bitcoin demand may exceed supply,” adding, “This could have a significant impact on the Bitcoin price.” and analyzed. Bitcoin undergoes a halving cycle every four years, and has shown a pattern of rising for about a year, falling for one year, and sideways for two years after the halving.

On the other hand, international oil prices continue to decline. On December 6 (current time), the closing price of West Texas Intermediate (WTI) crude oil (WTI) futures for delivery in January next year on the New York Mercantile Exchange was $69.38 per barrel (approximately 91,680 won), falling below $70 per barrel for the first time since July 3. . International oil prices are falling due to the negative outlook on voluntary production cuts announced on November 30 by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, a consultative body of major non-OPEC oil producing countries. In addition, the prospect of a decrease in crude oil demand due to China’s economic slowdown is also acting as a factor in the decline in oil prices.

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