Thoughts on new highs in gold and bitcoin

Gold recently made new all-time highs in USD terms. Those who have been following me for a while or who are paid subscribers know I’ve been long gold vs USD and AUD for a while.

Some might be confused about why gold is hitting new highs while the Fed hasn’t even cut rates and USD FX is mostly stagnant. One can find some answers in Alexander Campbell’s excellent post about gold in China. His theory is that Chinese investors and the central bank are buying gold while Western investors have been selling. It’s possible that we are in a new regime for gold where the #1 driver is financial repression in China, not real US yields or the direction of the overall dollar. I highly recommend reading the post:

Gold in China

Bitcoin is trading at $72k today, decisively breaking its previous all-time high of $69k. I thought it would be an interesting exercise to see what happened each time BTC broke its previous cycle high over the last seven years.

Feb 2013 - broke the previous cycle high of $20.96 and traded quickly up to $143 within two months. It pulled back by 50% but went on to trade as high as $1042.

Jan 2017 - broke the previous all-time high of 1042. Traded quickly up to 1162 and then crashed 37% before recovering back above all-time highs of 20k.

Dec 2020 - broke the previous all-time high of 20k. Ran quickly to 24k, paused, and then up to 42k before it saw a 31% pullback. Eventually traded to a cycle high of 69k.

Mar 2024 - broke the previous all-time high of 69k by trading up to 69.3k. It then flash-crashed by 14% before recovering back up to 69k.

Based on previous history, breaking to a new cycle high can result in two way volatility at first, but if one is able to hold through it, it’s a strong signal that more gains are on the way.

Update on new trades