Wednesday's Market Minute: Gold's Gearing Up To Put The Nail In Bitcoin's Coffin

At long last, it looks like the market might be maturing. It’s too early to be certain, but we’re seeing more and more days in which stock prices are positively correlated to economic data. The twisted “bad is good” trading regime that’s been the defining characteristic of the COVID bubble may finally be on its way out. 

The latest evidence was Tuesday’s response to the JOLTS number, which reported fewer job openings than expected. Normally over the past year, that would send bonds and stocks rallying together around the notion that a softening employment situation will also soften the Fed’s resolve to hike rates, which could in turn alleviate pressure on assets that’ve been correlated to long-duration bonds, namely expensive tech companies and speculative crypto assets.

Half the equation held up yesterday, with the 10-year yield sinking back below 3.5% and the dollar diving back to year-to-date lows. But stocks faded, including the Nasdaq. Days like that used to be rare, but are becoming more common as people seem to be realizing that a deeper slowdown in the economy will also bring a decline in corporate earnings, which will offset any valuation recovery that comes from fewer rate hikes.

The only thing that rallied with Treasuries yesterday was gold, and it rallied big. It’s now at a three-year high and trying to break out. The chart of gold and bonds was identical intraday. On the flipside, as the Nasdaq faded, bitcoin continued to struggle under $30,000. The biggest crypto asset, despite a big start this year, trades at a 30-day correlation of 0.9 with tech stocks.

After getting crushed last year right when the inflation on which coiners based their entire use-case surged, bitcoin is on thin ice, and it’s looking increasingly like investors around the world are turning to gold as their catch-all safety trade when they don’t know what else to do. Now, if Treasury yields do turn higher again, gold may not do well. But at a three-year high, the precious metal is finally living up to its name.

The market is going through a new, crucial episode in its maturation out of COVID mania. If gold breaks out to three-year highs and bitcoin’s still trading like a junk tech stock – while inflation’s hot, banks are struggling, and the bond market is certain the Fed has truly backed itself into a corner – even the most primitive HODLr will understand how big a lie they’ve been sold.

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