Over the next few weeks, gold is set to outperform Bitcoin, said Florian Grummes, managing director of Midas Touch Consulting. The question is how long this outperformance can last?
Is Bitcoin still going to be the earthquake that will shake all markets or is that moniker now going to be shifted to gold? We're going to be talking about this with and grimace managing director of Midas touch consulting, Florian. Welcome back to the show you have been calling for Bitcoin to outperform all their assets.
You set that in 2020, you were correct so far this year. You are still correct. Congratulations and welcome back. Thank you. Thank you, David, for having me, it's a pleasure to be back on case out. Give us the Midas touch. Give us the outlook on all three assets. Let's start with gold first because, um, I was, I was away on vacation last week and I haven't checked charts.
I came back today and I was like, whoa, we are way up. Tell us what happened. We're at 1900, uh, 1904 right now, as we speak on Monday. And, uh, this was, this is, this is a move that has been long anticipated, but it's finally been happening. What's been driving up the gold price. Well, first of all, I think it's important to make clear that we had an, uh, a big double bottom and mitten end of March in the gold market.
And since then, gold is moving up a step-by-step, it's not like crazy momentum, but it's a nice, steady uptrend. Um, So we have $230 right now. And, um, I think it's just basically the reaction to this nine month correction that we've seen since the new, all time high, last year in August. And, um, yeah, both probably still has some more upside here.
I think, uh, 1920, 1923 does this the 61, 8% retracement of the whole down move. So that's, I think the minimum target in the short term, And maybe with some luck, the bulls have enough power to push it towards the 1950, 1960 resistance. Uh, that's where I actually think we might get a little pullback back to the 1850 kind of range.
That's where your 200 day moving average is currently trading. And that would be actually the good launching pad then for the summer where I expect, uh, the attack towards the $2,000 level in the gold market. So I think it's looking very nice. Um, we had a nice big shakeout, nine months, deep correction, been painful for many people who came too late into the gold market last summer.
But, uh, yeah, it looks good here. And, um, uh, I think, uh, it will pull the silver also alone. So $2,000 by the summer. I, that was my next question as to whether or not we're going to reach $2,000 by this year. Now $200. Upwards is a pretty big move in a very rather short period of time. And I'm wondering if you think we're about to hit some resistance after this rather substantial move, but you said when he retraced 1850, Yeah, I think 1950, 1960 in the best case, maybe already 1923.
That's where I see this kind of like current wave up kind of stalling out. And then I would see a pullback towards maybe 1850, 1840, maybe testing the former downtrend channel from, from the upside. So, um, That would be a good buying opportunity if it happens over the next maybe two months, typically gold finds a seasonal low somewhere in June, July, and then starts a strong move up towards August and September.
So that would fit the picture. Let's see. Um, any pullback in gold is a buying opportunity here. Okay. Uh, we're talking about, uh, these charts offline Gold's relationship with inflation, and I had discussed with you how, um, according to my findings, Gold's historic correlation with CPI has been very, very low.
The correlation is rather, um, inconsistent, shall we say? However, if you plot gold price next to gold as inflation expectations. So. Future outlook of inflation. So if you take a look at GLD ETF versus the tip ETF, for example, the tip measures, the treasury inflation protection security. Now that correlation is very high.
So why is it that gold correlation with historic inflation is low, but if the correlation with inflation expectations is very high. Well, first of all, I'm not a fan of the CPI index or data. I think it's a hedonistic approach to keep inflation numbers low. Uh, it has been changed many times. So the formula is not the same, like they used, for example, in the 1970s.
So I would suggest to talk to John Williams from shadow stats, and this will give you a very different picture than the official and state CPI numbers. And then there's the second thing I would say is, um, CPI is looking in the mirror while, um, inflation expectation is actually really measuring. Uh, the emotions and the expectations of the people.
And that's why you would buy gold if you expect higher inflation. So it's no wonder that those two are basically going well in line with each other. Um, again, I think CPI is not a good way to look at the markets. Right. Are there other variables that you prefer to look at when it comes to measuring relationships with gold?
Like the dollar, for example, were interest rates, real rates. What else do you look at macro variables? I mean, in a really big picture, you look at the golden constant, which is for hundreds of years, basically you could buy various things with one ounce of gold. You could buy a dress for a man. For example, uh, you could buy with one ounce of silver, you could buy a chicken.
These kinds of things are established over hundreds, even thousands of years. So, um, this, it has, it has proof again and again, that gold keeps your purchasing power over a long period of time. This is an interesting concept. The golden constant. Now you mentioned this has been, this has held up for thousands of years.
I wonder if it will hold up against digital assets going forward. Bitcoin is relatively young than around compared to other assets has only been around for 12 years. It's nothing compared to gold. However, you know, if you take a look at the gold to Bitcoin ratio, for example, it's a steadily trending down.
I wonder if gold will maintain its purchasing power relative to digital assets going forward. What do you think. I've been tracking the Bitcoin gold ratio for many years already. And I've been publishing it in nearly every month in my report. And I don't think that gold can keep up with, uh, with Bitcoin.
Um, but it, that doesn't make me put all my money, all my eggs into Bitcoin, because I want to have something that is traceable that works without electricity. And that also works without the availability of free internet. Um, and that's why I believe you also want to old goals. So I've been always saying you want to want to have both gold and Bitcoin, but it is true and gold box have to accept that truth.
That Bitcoin has been outperforming gold mercilessly over the past 12 years before we move on to Bitcoin, let's, uh, wrap up with gold. Now, your outlook for the end of the year, let's say, uh, for the price. Now you mentioned $2,000 by the summer. What about all the way to December? I would expect that we get another somewhere between 2000 and 2050, 2075 later that year, but that gold will then make higher lows.
So let's say we get this. In the short term, just pull back 1850 over the next one or two months, then we on towards 2000 and then maybe the next pullback will end up. We're already at 1900 or even at 1950. And then you have these series of higher lows while we have a horizontal resistance line around the $2,000 level, maybe.
And then at some point later that year, early next year, I guess that can break out or run towards new old-timers. Okay. New all time highs, but at the end of the year. All right, Bitcoin. Now you wrote an article recently. Well, May 22nd. It was released. Bitcoin is an earthquake in the crypto markets. What do you mean by that?
I was referring to the, the nasty liquidation and crash in the sector. Um, uh, I mean over the last few weeks, we have seen that what Bitcoin basically was stalling out. It could make really. Well, it could create more momentum on the upside where at one higher, a high at 65,000, actually exactly on the day of the Coinbase IPO.
And since then, it, it gradually went lower. Uh, while at the same time, Ethereum managed to double. Which is already a warning signal. And then you had like all these crazy coins, like Dutch coin, et cetera, going through the roof and all these were really wanting signals. And then yeah, you had this kind of earthquake where suddenly everything started to crash due to all these liquidations.
Um, and that's basically what I meant with the, with the earthquake. Um, uh, but, uh, as you can see, the market has already stabilized. Uh, and many of the smaller coins actually are, have, have recovered quite well. So, um, I think we have to accept actually in all markets now, crazy volatility. Uh, this is part of the cracker boom.
And, um, yeah, let's see. Bitcoin might need a little bit more time to digest this crazy price action over the last few weeks. Um, but I think towards the third and fourth quarter, we're going to see new all-time highs in detention, talking about the crack-up boom. You love, we, you and I have talked about the crack-up boom and, and, uh, and, and hyperinflation before another show.
It was, it was, uh, it w one of the more memorable conversations I've had with you now get this Florian. What if, what if gold, isn't going to be the ultimate hyper inflation hedge of the future? What if that role will be shifted to something like Bitcoin? Is that possible? I think it's already happening. So, um, again, you want to have both, um, I'm not the guy who puts all my chips on red on one horse, but I think it's already happening.
The crack-up boom is a process and you need to understand that this can take years and it's the best explanation actually for the fact that everything is rising, right? I mean, the stock market is at new all-time highs. Real estate is up. Lumber prices are up. Copper is up, oil is up golden, precious metals are up, the cryptocurrencies are up, everything's going up.
And I think the crypto cracker boom is really the best description because it basically describes that due to this constant expansion of the currency supply, uh, the confidence of the people that's getting lost in inflation expectations are getting step-by-step out of control. And that's why everybody's trying to bring the hard earned feared money somehow into hard assets.
You're right. Inflation expectations are trending up. I'm going to show the tip ETF one more time. It's been trending up all year now, uh, in relation to Bitcoin, are you suggesting Florian that Bitcoin's rise in the last six months or so? Well, it has been volatile in the last, in the last month, but generally speaking, the uptrend we've seen in the last six to eight months was that due to inflation expectations.
Of many of many factors is certainly also inflation expectations. Bitcoin had been in a, in a long, uh, constantly duration since the all time high in 2017, it took the market nearly three years. To be ready for the next move higher. Um, gold had been already moved before Bitcoin, so there was also a signal and Bitcoin is a big, innovative, disruptive technology.
Um, the, the, the, the, uh, uh, decentralized network is still something new in the big picture for mankind. And, um, yeah, it's going to attract more and more money. And of course behind the Bitcoin is the idea, the separation of money and state. And, um, this is a concept that people maybe are not really aware of, but it is happening step by step.
And, um, uh, yeah, you, you, you want to hold Bitcoin, you don't want to be awake afraid of it. Step by step. Yes. It's a crazy volatility. Uh, in the, in those markets. If you have a bad timing, you're down 30, 40, 50% within two weeks. So you have to be careful what you're doing, but, um, I think it's the best pitch that we currently have.
You showed this chart in your article, it's the fear and greed sentiment index for Bitcoin. And currently, as of, as of today, I just checked the latest update. It's still in the extreme fear section. It's, you know, it's moved up a little bit towards the greed hubs, uh, uh, area of the chart, but not by much, it's still in the extreme fear section.
So, what, what does this tell you, Floyd? Are we still going to see more downtrend because of this sentiment? Or do you think this is a sentiment reflecting an oversold position? I think it's reflecting an oversold position. Um, there, the numbers, as you rightly pointed out have been around 10, I think last, last year, the last week I've been tracking this, uh, this fee in greed index also for quite some time.
And, um, it has done a great service. You would need to be a contrarian. So if everybody's greedy, like if you weeks ago, you want to be careful. And that's what I told my people. And, um, now that there's panic and fear in the market, I think it's interesting. Again, I'm not sure if Bitcoin really has hit the low already.
There's one thing that I need to share with you. There is an open gap in the Bitcoin future between two 24,000 and I think 26,500. So it could be that the market needs to close this gap at some point over the next two, three months. I'm sorry, what do you mean by gap? What is this gap? What are you referring to?
Because it's a 24 hour 24, seven hour market, but the futures market are only trading Monday to Friday. So there was back in December, there was a big move during the weekend in Bitcoin, and it jumped 2000 or $2,500 higher. And on Monday when the futures market opened, uh, yeah, immediately the prices were reflecting $2,500 higher levels.
And this gap, there was no trade basically happening. Um, and, and usually, or often, and this is true for actually all markets and all stocks. Often those gaps get closed at some point. And, um, I wouldn't be surprised if, if Bitcoin comes all the way back to 24 to 26,000 more or less to close that gap. But I think that would be a wonderful buying opportunity, but I don't think it's going to happen immediately because as you rightly pointed out, sentiment is beaten down.
So I would first expect a continuation of this recovery of this pounds, maybe 42, 47, maybe even 50,000 before we have another pullback in Bitcoin. Everything is speeding up. That's also part of the con the crack-up boom theory. Things are accelerating because we are more and more going into an exponential, uh, period of time of, yeah.
Exponential age. I mean, Ralph Paul called it the exponential agent, I think he's right. Everything's becoming more and more exponential. So, so yeah, you did read in your article, your conclusion was that above $30,000, the uptrend is still intact or right now with, at 36. And like you just said, you're expecting to go to maybe 40 to $50,000, but why would a retrace from there?
Why wouldn't it keep going up? Well, of course, I don't know. I'm just saying there is an open gap in the market I'm aware of this. Usually often markets tend to close those gaps at some point, especially in the futures market. So, um, This could be one downside that we have to be aware of over the summer, I would say.
Okay. And that's actually, if, if Bitcoin corrects a little bit further, this will drive gold. So it will drive gold higher. Oh. Because a lot of money has been moving from the precious metals into Bitcoin and lots of people who would have. Normally or would have normally bought into precious metals that have been buying into Bitcoin.
So if there is a, and we've seen this already over the last few weeks, so because you asked me also before, why, why gold is, uh, had a nice move over the last few weeks? I think the, the, the, the correction in the crypto space certainly put some fuel into the rally for gold. That's an interesting point.
There has been a debate as to whether or not capital has floated away from gold into Bitcoin and vice versa. And you're saying it has a, what, what data were you looking at to, to suggest this, um, this theory? Uh, yeah, I mean, capital flows are always tricky to track. Right. But you can definitely see it. I mean, all the people that, that.
Our subscribers from me or follow me, or that I talk to who used to be strong gold box are interested only in precious metals at some point, become interested in Bitcoin and cryptos. And if prices are moving high on IO, people get bored of the old, old school, gold market and put their money into cryptos.
This is always the same. So, um, higher prices attract more speculation is always the same. And, um, I think that happened and now lots of people got hurt. Let's see, um, where they gonna move over over the next few weeks. But I think for the next few weeks, precious metals are probably going to do better than, than the cryptos.
Okay, well, thank you. That's uh, that's the first time I've heard you say that in many, in many months. All right. Uh, interesting to see your sentiment shift back towards the metals. Now let's close in the metals. Bausell three. Uh, you were talking to me about this offline. You wrote about this. tell us broadly, what is basil three.
If this was a regulation that was first introduced way back after the financial crisis of 2008, why is it still relevant today? And what is the impact on the metals markets? Well, it's a voluntary, uh, regulatory framework basically to stress test central banks worldwide. And yeah, it, it basically requires banks to hold a certain percentage central bank.
Sure. Financial institutions, it central banks, and also financial institutions. Um, and it requires the banks to hold a certain percentage of the essence. So essence to, in something that is de leveraged or, or something that they can use to leverage their lendings against and gold is now, uh, I think end of June moving from a tier three asset towards a three, one asset, meaning it will count as a hundred percent reserve asset.
And, and I assume that, uh, especially in the Eurozone, the European banks will find that highly attractive. Uh, to, to increase their gold holdings and that could actually lead to more physical gold demand. Um, that's basically what I wrote in the article. Now, uh, you had forecasted maybe 1950, $2,000 by the summer.
Uh, and you were saying that July is around the time that basil three would have to be implemented. So that's, that's only what, $50 to a hundred dollars upside. So I'm assuming that then Basel three would not have a significant upward impact on, on gold. Is that, is that fair to assume? Florian? No, this is not something that happens within a day or two.
This is a process again, over the next one to three years, even it can actually lead to more significantly more physical gold demand from European banks. So far what we've seen over the last two decades, basically most of the physical gold has been moving from the west to the east. Uh, and, and this trend is unchanged.
So we know that China and Russia are hoarding gold. Basically there is no physical ounce of gold li leaving China. China is the largest coal producer already. And, uh, besides that we have the Indians buying gold. Most of the gold is actually in Indian temples. Um, and, and all of the Western central banks basically have, step-by-step either depleted their gold reserves or just not increased it at least.
And most of the financial institutions in the Western countries also, didn't really accumulated a lot of gold reserves. And this might change now, especially in the us zone. And now you're talking about the different tiers of capital. Uh, how do you classify tier one, two and three? And what is gold currently right now under this classification under this classification, gold is a tier three asset and it will move to a tier one asset and banks can basically use physical gold holdings to, uh, de leverage the lendings against.
So that's a significant change in the tiers. W did the tears is basically how you can treat this in your balance sheet, in the firmer, in the term of distress test against. So, um, it depends on, uh, the idea behind it is of course, to reduce the risk in the system and, um, banks have, we all know that created huge amounts of leverage.
By holding, especially, uh, paper promises, uh, uh, against the, uh, the lendings. And, um, once they start putting physical gold into a tier one asset, uh, this will probably stabilize the whole thing quite a lot. And it could also actually be, be a solution for at least a partial solution for the problems that we have in the system.
So, um, uh, we all know that since the end of the gold standard in 1971, step-by-step this confetti party over the last 50 years got out of control. And, um, it would be good if banks actually put physical gold in their balance sheets again. Okay. And are basically incentivized to do so. Okay. All right.
Finally, Floria, you said that gold will outperform Bitcoin over the next couple of weeks. Well, don't keep this hanging now. They're flooring. What about for the rest of the year? Do you still think big Bitcoin will outperform everything or is gold going to take the crown this year? That's a good question, but I think later that year you will see Bitcoin catching up again.
Yeah. I don't think that this bull run is over. I think we are in a, some form of a consolidation in Bitcoin right now. It could take a few more weeks or even two or three months. But I think, uh, later in the third, and especially then the fourth quarter, I think Bitcoin will, we'll see a stellar rise again.
And I still believe we're going to see new all time highs. That that was okay. So you answered my question so big all time, highest for a gold. You all time highs for Bitcoin. You really can't go wrong investing either one. Thank you very much, Florian. Thank you for coming on the show today. Great updates.
Thank you David, for having me. It's a pleasure. Thank you. Always a pleasure here and thank you for watching Kitco news. I'm David Lynn. .