Exploring the Link Between Bitcoin, Gold and China

In recent market trends, a countrary motion between the values of Bitcoin and gold has been observed, with gold prices plummeting while Bitcoin sees a rise. This fluctuation has caught the eye of many investors and financial analysts around the world, and one of the key factors supposedly influencing this trend is China.

Bitcoin's Growing Divergence with Gold

Bitcoin and gold are often viewed through similar lenses due to their shared role as inflation-hedge assets. Historically, expectations would predict a collective rise in these two assets. Yet, recent market data presents a different reality; gold prices are currently declining, while Bitcoin enjoys a surge.

Interestingly, there seems to be an inverse relationship between the Consumer Price Index (CPI) impact on gold and Bitcoin. For instance, a noticeable sell-off happened last year when there was a sharp increase in CPI. This hints at the possibility that inflation may not be the dominant force driving this market.

China's Gold Selling Strategy

The contrasting dynamics of falling gold and rising Bitcoin may be partially attributed to China's financial strategy. It is speculated that the Chinese government is selling gold as a method of defending their currency while preserving their vital dollar foreign exchange reserves. The implication of this action is fascinating, painting a backdrop of a dollar shortage rather than an abundance of liquidity. This essentially challenges the conventional inflation narrative.

The actions taken by China appear to have distinct correlation implications for both gold and Bitcoin. Notably, there is a striking likeness between the value patterns of these assets and the Chinese Yuan (CNY). This correlation can also be extended to Bitcoin, which has lately been moving in sync with the CNY.

Strategic Use of Gold and Impact on US Treasuries

China's decision to use gold as a stabilizing device for the Yuan instead of heavily relying on Treasuries and foreign exchange reserves could potentially lift some of the selling pressure off US Treasuries. This strategy, in turn, could have a radical impact on the US 10Y yield, which recently hit 4.82%. The pressure on the market is more related to a dollar shortage, not inflation, predicting a potential push towards recession.

Inflation Expectations in the Current Market

Returning to a closer examination of US markets, the debate is primarily set between the possibilities of impending inflation versus a potential recession. Certain market-based indicators, like the 5-year and 10-year Breakevens and 5y-5y Forward Contract, are showcasing an inflation expectation of less than 2.5%. This trend is a strong indication that the market is becoming increasingly cautious treading a path similar to the situations in 2007 and 2019.

However, a stagnant bank credit outlook reveals a high possibility of a deflationary outcome, which is beneficial for Bitcoin. This is because Bitcoin serves as a hedge against systemic credit risk with no counterparty risk, unlike most credit-based financial assets. This further consolidates the 'recession-not inflation' thesis that has been developed in recent times.

Recession-bearers: Bitcoin and Stocks

Based on historical patterns and financial metrics, it can be predicted that Bitcoin as well as risk assets should remain on an upward trajectory leading up to a recession. Given the current circumstances, there seems to be a clear take-off runway for Bitcoin, ushering a stimulating phase through the halving and into the following year.

Frequently Asked Questions

Who owns the gold in a Gold IRA?

The IRS considers an individual who owns gold as holding “a form of money” subject to taxation.

You must have at least $10,000 in gold and keep it for at most five years to qualify for this tax-free status.

Owning gold can also help protect against inflation and price volatility, but it doesn't make sense to hold gold if you're not going to use it.

If you plan to eventually sell the gold, you'll need a report on its value. This could impact the amount of capital gains taxes your owe if you cash in your investments.

To find out what options you have, consult an accountant or financial planner.

What should I pay into my Roth IRA

Roth IRAs can be used to save taxes on your retirement funds. These accounts cannot be withdrawn until you turn 59 1/2. However, if you do decide to take out some of your contributions before then, there are specific rules you must follow. First, you can't touch your principal (the initial amount that was deposited). You cannot withdraw more than the original amount you contributed. If you decide to withdraw more money than what you contributed initially, you will need to pay taxes.

The second rule is that you cannot withdraw your earnings without paying income taxes. So, when you withdraw, you'll pay taxes on those earnings. Consider, for instance, that you contribute $5,000 per year to your Roth IRA. Let's further assume you earn $10,000 annually after contributing. You would owe $3,500 in federal income taxes on the earnings. The remaining $6,500 is yours. Since you're limited to taking out only what you initially contributed, that's all you could take out.

You would still owe tax on $1,500 if you took out $4,000 of your earnings. On top of that, you'd lose half of the earnings you had taken out because they would be taxed again at 50% (half of 40%). So even though you received $7,000 in Roth IRA contributions, you only received $4,000.

There are two types if Roth IRAs: Roth and Traditional. Traditional IRAs allow for pre-tax deductions from your taxable earnings. When you retire, you can use your traditional IRA to withdraw your contribution balance plus interest. You have the option to withdraw any amount from a traditional IRA.

A Roth IRA doesn't allow you to deduct your contributions. However, once you retire, you can withdraw your entire contribution plus accrued interest. There is no minimum withdrawal amount, unlike traditional IRAs. You don’t have to wait for your turn 70 1/2 years before you can withdraw your contributions.

What is the cost of gold IRA fees

$6 per month is the Individual Retirement Account Fee (IRA). This includes account maintenance fees and investment costs for your chosen investments.

If you want to diversify, you may be required to pay extra fees. These fees will vary depending upon the type of IRA chosen. Some companies offer checking accounts for free, while others charge monthly fees for IRA account.

Most providers also charge an annual management fee. These fees range from 0% to 1%. The average rate is.25% annually. These rates can often be waived if a broker, such as TD Ameritrade, is involved.


  • This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
  • Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
  • Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
  • You can only purchase gold bars at least 99.5% purity. (forbes.com)
  • (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)

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How To

How to Buy Physical Gold in An IRA

The easiest way to invest is to buy shares in companies that make gold. But, this approach comes with risks. These companies may not survive the next few years. Even if they do survive, there is still the possibility of losing money to fluctuating gold prices.

Alternative options include buying physical gold. You will need to either open an online or bank account or simply buy gold from a reliable seller. The advantages of this option include the ease of access (you don't need to deal with stock exchanges) and the ability to make purchases when prices are low. It is also easier to check how much gold you have stored. You will receive a receipt detailing exactly what you paid. You are also less likely to be robbed than investing in stocks.

There are also some drawbacks. You won't get the bank's interest rates or investment money. Additionally, you won’t be able diversify your holdings. You will remain with the same items you bought. Finally, tax man may want to ask where you put your gold.

If you'd like to learn more about buying gold in an IRA, visit the website of BullionVault.com today!

By: Ansel Lindner
Title: Exploring the Link Between Bitcoin, Gold and China
Sourced From: bitcoinmagazine.com/markets/the-bitcoin-gold-china-connection
Published Date: Mon, 09 Oct 2023 21:55:00 GMT

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