Gold price driven downwards – Bitcoin a better bet

July 22, 2014

Last year, the Winklevoss twins predicted that Bitcoin is set to become Gold 2.0, right now it’s starting to look as if they might well be right. Every day, according to estimates, around £220bn of gold changes hands in London. The gold price has been set since 1919 by the London Gold Fix. but, of late, the gold fix mechanism has been somewhat losing its luster.

There have been growing concerns that the London Gold Market Fixing Limited, which is owned by Barclays, HSBC, Société Générale and Scotiabank, may have been manipulating, or at the very least allowing the gold price to be manipulated (live price charts). In a statement to the market, the four banks stated that they would seek to appoint an independent third party to oversee the price fix mechanism. One week ago today, gold was trading at $1,345 a troy ounce, and silver was also showing a 2.3% increase to $21.55 per ounce. Questions are now being asked about whether this price was, in fact, artificially inflated by the Gold price fix.


On August 24th, 2011 the gold price peaked at a high of $1,883.36 per troy ounce. The gold price has been in a state of gradual decline since then, although in times of uncertainty people choose to hedge their investments by buying gold bullion. Indeed many bullion companies are offering gold for bitcoins; BitGild and Agora Commodities being just two that I am familiar with, both respectable and professional companies that are not paying me for mentioning them. When I commenced this article, the tragic events of Malasia Airlines MH17 had not occurred and even in so great a tragedy the markets are moved to respond. Prices fell on Asian, European and American markets as people moved to mitigate any risks that the developing hostilities in the Middle East and also the Ukraine might expose them to. Traditionally, in times of war, oil prices and steel prices rise, and people move investments from equities and into safer bets such as cash and bullion.

People are moving fast into regulating Bitcoin, and there are already talks of Black and White bitcoins. Bitcoin price has stabilized since last April and is currently holding North of £600. There has been some level of slippage in the past few days, but the Bitcoin price has the advantage of being set by the market for bitcoins; it is independent of committees and cartels.

As the gold price removes from the price fix mechanism, we are entering an area of floating gold price that has been unknown to us since 1919. I am not advocating a policy of sell, sell, sell, but I would advise people to wait and watch what happens. This may turn out to be a time where the gold price is less concerned with its value as a hedge of money in times of uncertainty and more concerned with the true price that we should have been trading. As more and more businesses come on board the Bitcoin express and regulators move to ‘ legitimize’ us, it would be reasonable to expect the value, in the coming weeks, to top the magic $700. It will be interesting to see if it can climb higher in a post Mt Gox era.

Featured image by Shutterstock.

Last modified (UTC): March 14, 2017 09:42

Tags: Bitcoin
PJ Delaney @P.J. Delaney@delboyir

Masters in Public Administration, Bachelors in Mgt., I live in Ireland, I have a bit of a background in Economics and lots of opinions on everything else.