The shocking plunge in the value of bitcoin and other cryptocurrencies is spurring increased buying in gold bullion that may support further gains in the precious metal.
Several gold dealers in Europe have told Bloomberg that they have noticed a sharp spike in customers wishing to convert their cryptocurrencies, or cryptos, into gold.
While the price of Bitcoin, Ethereum and Ripple staged a bounce back late this week, this is unlikely to dampen demand for gold.
Fears of a further painful drop in the price of cryptos is one factor, but it's the extreme volatility that is the main reason for investors to switch from "digital gold" to physical gold – and experts won't dispute the propensity for further wild gyrations in the price of cryptos even as they debate whether the recent price falls represent an attractive buying opportunity.
Considering that gold has been around for thousands of years as a means to store value, and has a strong track record of providing a safe harbour during times of distress, it isn't about to be replaced anytime soon, regardless of how much traction digital currencies gain in the next few years.
Frankfurt-based CoinInvest told Bloomberg that the phone has not stopped ringing in the past few days with people asking how to convert their bitcoin into gold. The company has seen a five-fold increase in coin sales.
Other gold dealers are also reporting similar trends and it's not only the increase in transactions, but the increase in the value of each transaction that is telling.
Bitcoin and the crypto market may be gold miners' new best friend. The precious metal inched up 0.1% to US$1,328 and is hovering at a near four-year high.
There had been concerns that the yellow metal would start falling soon as the US dollar starts to regain its upward momentum as interest rates in that country continue to be lifted.
This could well be offset by capitulating crypto traders, particularly since most of them would not be interested in gold bullion in the first place, if not for their sudden wealth.
ASX-listed gold miners like Newcrest Mining Limited (ASX: NCM), Evolution Mining Ltd (ASX: EVN), Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) will be smiling.
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