With Gold prices stretched and Bitcoin Around Key support, convergence could be approaching.
In previous analysis we’ve highlighted a positive (although imperfect) correlation between Bitcoin and USD/CNY. And in recent times we’ve seen Bitcoin and gold rise in tandem during bouts of risk off, although we can see the relationship has broken down these past 10 days. Curiously, the positive correlation between gold and bitcoin broke down just after USD/CNY broke about 7 - a level many didn’t expect to see break.
In some way this appears encouraging to see as it could serve as a reminder that gold has stood the test of time as the true safe-haven. Moreover, in a world of negative yields, a gold brick that yields zero looks quite appealing.
However, given the strong bullish structure of Bitcoin and lack of mean-reversion on gold, we suspect the two could converge and provide a potential buying opportunity on Bitcoin or (for the more daring) shorting opportunity on gold. Yet given I’m bullish on both markets overall, the former seems more appealing to my approach.
At time of writing, Bitcoin is trying to form a bullish pinbar on the daily chart. Whilst it may not mark the precise low, it does show a hesitancy to push beneath 9,530 and pace the way for a potential trough.
And with Key support around 9k, bulls could look to buy the dip to trade long within its current range, or position themselves in anticipation for the next impulsive move higher.
If prices are to break beneath key support it could mark an interim top but, given the bullish structure on the weekly chart we’re on the lookout for its corrective low and for its bullish trend to eventually resume.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.