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Goldman Finally Catches up to Us.

Goldman Sachs  released a research report October 19th that comes down squarely on the side of gold as a reliable store of wealth rather than bitcoin, which is untested in market turndowns.

In other words, if gold is not money, then Bitcoin is even less so

From the Post Entitled “Dear Wealth Preservers, You’re Doing it Wrong” published here,  Zerohedge and other non mainstream media. 

Soren K. Group on  July 3, 2017

Bitcoin shares with Gold for the moment the ability to unshackle people's economic freedom, but it is ludicrous to think it could satisfy the other requirements needed to be called money let alone the other qualities that make gold the best example of the definition of "Money" itself.

  1. Medium of exchange: Bitcoin satisfies this. It is used as a means to transfer your Rubles to Dollars without being "watched". Not unlike how the USD is used to convert your chicken sales into a purchased cadillac. But different in the sense the Government is watching that trade and will not let you sell your chickens to that guy in Haiti even though he is offering a higher price. 
  2. Unit of account: Bitcoin is too volatile, and not "commonly accepted" as a standard - although that may change as it evolves. just know that volatility undermines confidence in a currency (Zimbabwe, Reichmarks etc)
  3. Store of value: Bitcoin does not hold its value over time. Yes it is growing in value, but that is precisely what we mean. It is also NOT a convenient way to store wealth. Just ask the guy expatriating Yuan to Australia to convert it to  USD and his Bitcoins drop 20% in 5 minutes. Stability is key. And Bitcoin has none of that.

Now Comes Goldman

Precious metals like gold are “neither a historic accident or a relic,” said the GS report 4 months after our analysis. 

Bloomberg quotes the report:

“Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,” analysts including Jeffrey Currie and Michael Hinds wrote. “They are neither a historic accident or a relic.” Looking at properties such as durability and intrinsic value, they are still relevant even with new materials discovered and new assets emerging, such as cryptocurrencies, they said.

It affirmed that gold is more durable than cryptocurrencies because cryptocurrencies are vulnerable to hacking, government regulation and infrastructure failure during a crisis.

When assessing the assets on key characteristics of money Goldman said:

Gold wins out over cryptocurrencies when assessed on the majority of the key characteristics of money, according to Goldman Sachs Group Inc., which adds that fear and wealth are the core drivers of bullion.

For perspective, it is widely accepted that the key criteria in deciding if something is money (as opposed to merely currency) are:  It must be durable, divisible, convenient, consistent, and have use value in and of itself. It is durability, divisibility, and consistency (in terms of stable value) where the jury is still out on Crypto currencies. 

Goldman also reminds us that gold holds its purchasing better than cryptocurrencies and has much less volatility. In dollar terms, bitcoin has had seven times the volatility of gold this year.

Since Goldman’s research department has not been notable as a friend to gold, the fact that they favor gold over bitcoin may be highly revealing in more ways than one. Not all of which can be viewed positively. 

As skeptics of any research where the publisher has the ability to trade it from the Prop side and has a large captive client base, there is always the risk of marketing materials masquerading as research. 

Dont be surprised if the bank is buying the next dip on BTC as we speak. Remember Jamie Dimon’s trashing of BTC even while J.P.Morgan was buying. 

But there you have it. As we have said several times in this space. Bitcoin and its crypto cousins are not money (yet) .

Related  stories here 

Read more by Soren K.Group


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