Bitcoin nipping at gold demand

For centuries, gold has held a unique role: as a form of currency, a store of value and sometimes a speculative or alternative asset to stocks and bonds. No other asset has managed to retain such an allure over time.

And over the centuries, there have been other pretenders for gold's throne (salt, florins or ducats, anyone?) but none has survived. The latest potential competitor for gold may be bitcoin, the cryptocurrency created in 2009 as open-source software for a decentralized form of payment.

Last year, when bitcoin prices rose from their 2017 starting value of just under $1,000 to over $19,000 by mid-December, market chatter was that bitcoin was usurping gold's role as a store of value and alternative to fiat currencies. After all, bitcoin's price was skyrocketing, while gold was languishing, staying mostly in the $1,200 an ounce range, despite rising geopolitical worries.
That price charts showed a near-inverse relationship between the two — especially starting in the fall — likely added to the speculation that bitcoin was sapping demand from the yellow metal.

The fever surrounding bitcoin has died down — that happens when the price of an asset falls by more than half in a short time period. But questions remain: Is bitcoin a competitor to gold? And what's the outlook for the precious metal?

Some say maybe

Pete Thomas, senior vice president of Zaner Precious Metals, a physical markets broker, said during last year's bitcoin price run-up, some of his regular customers who buy gold coins or bars on a monthly basis told him they were opting to buy bitcoin at the time instead. He also heard anecdotally from other precious metals coin brokers that they were seeing bitcoin syphoning demand from gold.

He said one of his firm's long-time clients, a major global coin dealer, told Thomas he saw demand shifting.

"He told us that 20 percent of his business was now crypto," Thomas said. "People were going to a gold broker and swapping crypto out or swapping gold to buy crypto with him. He's a real numbers guy and really reliable."

Will Rhind, founder and chief executive officer of GraniteShares, issuer of the GraniteShares Gold Trust (BAR), a physical gold ETF, said when bitcoin prices were higher, it may have reduced marginal demand for gold, but he doesn't believe that bitcoin is a "zero-sum game" for gold.

"Certainly there are people who invest or buy both of them, but there's not a big market share differential between the two," he noted.....https://www.cnbc.com/2018/04/21/bitcoin-nipping-at-gold-demand.html