SIMON BROWN: Of gold bars and crypto charts

Both gold and bitcoin recently hit record highs — a strange thing, when you consider that they’re designed for different situations. If one is at a high, you’d expect the other to be under pressure.

Gold is for when investors are fearful — and there’s lots to be fearful about right now. There are questions around whether rates will be cut later rather than sooner (US Federal Reserve chair Jerome Powell certainly says so); wars in Europe and the Middle East; shipping channel blockages in the Red Sea and Panama Canal; elections in more than 70 countries; and, of course, the much-feared recession, which has already hit economies such as Germany and Japan. Plenty to worry about, even as developed markets trade around record highs.

Bitcoin, on the other hand, is a risk-on asset — you buy it when you want lots of extra risk. That makes sense when markets are at highs, but only if you ignore the fears and the fact that in the US those highs are driven by five of the magnificent seven (Apple and Tesla are red year to date). The big driver for bitcoin right now is the bitcoin halving next month and the 11 exchange traded funds (ETFs) listed in the US in January that have sucked in almost $50bn of investors’ money.

For crypto investors the question is, why even bother with a bitcoin ETF? The answer is that the many crypto exchanges have had all sorts of troubles with temporary halts on withdrawals, hacking and closure. Locally, one exchange saw 24% of crypto disappear. An ETF should (and I stress the should) be safer.

I would add that, as far as I’m concerned, your crypto is safe only in a hardware wallet that you control. I have written before that my preferred wallet is the Ledger Nano S Plus.

As for a bitcoin target? Frankly, it’s impossible to predict after such a sharp move higher, but more upside seems certain.

With gold my short-term target is about $2,500. We have a local ETF — ETFGLD from 1nvest — with a total expense ratio of 0.25%. We also have gold miners that are benefiting from the boost in the gold price, as the operational leverage boosts profits well in advance of the move in the precious metal. We have seen Harmony and Gold Fields up more than double the gold price in rand over the past three years while others lag, with DRDGold up only 10% on a 55% move in the gold/rand price.

My strategy here is to hold some gold ETF, which I have held for a few years now, and more recently I added AngloGold Ashanti. Considering the fears, the central bank buying of gold (gold is even in all those AI chips being produced) and general renewed interest, the metal is looking good so far.

As always, neither my gold nor crypto exposure is large. I always manage risk with position size so things don’t go totally pear-shaped in my portfolio if I’m wrong.