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(Kitco News) - Are the gold and Bitcoin rallies sending mixed messages to the market, and which narrative should investors pay attention to more? Gareth Soloway, Chief Market Strategist at VerifiedInvesting.com, breaks down the two signals.
Even though gold and Bitcoin rallied in tandem — the two assets sent different kinds of messages to the market about the global risk appetite, Soloway told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
As Bitcoin topped $69,300 and set a new record high on Coinbase — the largest crypto exchange in the U.S. — on Tuesday, gold rallied to new all-time highs above $2,100 and even extended that rally the following day, trading above $2,150 an ounce.
A simultaneous record high for gold, a traditional safe-haven, is in contrast to Bitcoin, which still trades as a risk asset despite being viewed by some as a store of value, Soloway said.
"The risk-on environment is driving Bitcoin. We've seen the stock market making new all-time highs. The NASDAQ has been really running, but we've seen other sectors in the S&P lagging technology," he explained. "That's been driving the stock market in Bitcoin with money flow. There's also excitement about the spot ETF inflows. The talk has been contributing to this GameStop, AMC-type run in this asset."
In gold's case, Soloway points to smart money getting involved in the trade. "I'm convinced that smart money is at a point here where they're starting to say, this is a bubble in these risk assets, and therefore, they're rotating [into gold.] You got the momentum kicking in now," he said.
Soloway pointed out that viewing gold as unimportant is a mistake. "The central banks, the ones that print all the money, are buying the most gold," he said. "That's the smart money. Institutions and hedge funds are not so smart. They're included with everyone else, and they're running after Bitcoin. They're running after stocks."
What's next for Bitcoin
Soloway describes the recent Bitcoin rally as a "culmination of greed," with people chasing the market, which creates a highly volatile environment.
"Just looking at the last week, we're up from $50,000. The momentum of that carried up to this all-time high, but it's also known as a technical double top," he described. "There's notoriously going to be players that are selling into that level or shorting it. And when you get to this point of euphoria, it gets every last buyer in so that when those sellers and shorters start pounding it down, there's no one left to buy."
For Soloway's breakdown of Bitcoin's immediate support and resistance levels, watch the video above.
Soloway warns that if the stock market tops out and sells off, Bitcoin is at risk of following in its footsteps. "This has been my thesis for a long time — if the stock market sells off dramatically, Bitcoin comes in dramatic as well," he said.
In risk-off trading conditions, Bitcoin retraces back. For Soloway's price forecast in this scenario, watch the video above.
For insights on how steep the market selloff could be and the immediate triggers for the price reversal, watch the video above.
Soloway also reveals where he sees Bitcoin in May and at the year-end. For his longer-term price calls, watch the video above.
What's next for gold
This gold breakout, which has been long coming, is just the start for gold and gold miners, Soloway noted.
"This is huge for gold. We've been hovering right up against this level since the 2020 COVID run," he said. "You can calculate the next target via an inverse head and shoulders, and it gives us a $2,500 an ounce."
On when gold can hit this price target, watch the video above.
Soloway also breaks down the contradiction between gold reaching new all-time highs and gold ETFs continuing to see outflows.
"Gold has stayed so close to its all-time highs because there is demand. There's massive demand from governments stockpiling. It has to do with the debasement of currencies. These central banks know that they will have to, at some point, turn the printing presses on. How do you backstop your own? You have to buy that gold," he said.
For other assets, Soloway is bullish on going into the spring and summer, watch the video above.
Kitco Media
Anna Golubova
