A little over a year ago today, Bitcoin and other cryptocurrencies were gathering momentum. Fast forward to the summer of 2020, and Bitcoin has managed to test its 52-week highs. Before this year began, I’d suggested that investors should pour into gold rather than betting on Bitcoin or its digital brethren. Has anything changed now that we have made our way into the second half of this year?
Why Bitcoin has surged in the first half of 2020
The COVID-19 pandemic threw major markets into chaos in the late winter and early spring. Central banks sprang into action in March and April. North American markets surged back into a bull market almost as quickly as they had retreated into correction territory. Meanwhile, the lack of confidence drove many investors into alternatives like Bitcoin.
Over the course of 2020, Bitcoin has climbed from a low of US$4,106 to a high above the US$10,000 mark. This still pales in comparison to the highs it reached during its bull run in 2017. Bitcoin remains a highly volatile store of value, and it is still facing regulatory pressures. While it faces regulatory risk, Bitcoin will struggle to compete with gold and silver as safe havens.
Are gold stocks still the better bet?
Gold has gone on an absolute tear in 2020. It came into the new year with some solid momentum. However, the COVID-19 pandemic and subsequent economic downturn pushed the yellow metal to seven-year highs. Gold is now testing resistance levels around the $1,800 mark. Back in September 2019, I’d explained why gold could hit the $2,000 price point in 2020. That goal is still attainable at the halfway point.
The debate over physical gold versus Bitcoin has raged since late 2017. However, gold bugs who value flexibility are likely more drawn to gold mining stocks. Barrick Gold (TSX:ABX)(NYSE:GOLD) is one of the largest gold producers in the world. Its shares have climbed 48% in 2020 as of close on July 3. The stock is up 71% year over year.
In Q1 2020, Barrick Gold reported gold production and costs that were in line with its full-year guidance. The realized gold price per ounce stood at $1,589 in the first quarter. Momentum in the spot price of gold will continue to power Barrick’s year-over-year improvement going forward. Better yet, this gold stock still offers nice value with a price-to-earnings ratio of 10.
Bitcoin’s recent momentum is notable, but it is still meeting resistance in coming close to its 52-week high. Gold, however, is on a terrific run and has shattered price resistance again and again in 2020. The COVID-19 pandemic is still confounding policymakers in the United States. Because of this, a significant economic rebound will likely be delayed. This environment, combined with historically low interest rates, is very bullish for gold going forward.