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In a recent interview on Sprott Money News, legendary investor Eric Sprott mentioned a potential factor that could be a spark in the gold and silver markets. Specifically, he wondered what might happen if crypto profits continue to grow and some of them are recycled into the gold and silver space.
While many in the gold and silver community are skeptical about the crypto sector, there is also a lot of overlap. Many of the crypto supporters have a Libertarian background, and Bitcoin was essentially designed as a response to the flaws of central banking.
So while many have been focused on the debate over whether precious metals or cryptos will represent the future of money, perhaps more significant from an investing perspective is how the markets could affect each other.
Sure, there are investors in each that are committed to either precious metals or cryptos, but not both. Yet there are also many who see both alternative asset classes as great investments and appreciate a means of diversifying their bet against the dollar.
Consider the following that Sprott mentioned in his interview:
“There are analogies between gold and Bitcoin in the sense that the Bitcoin owner doesn’t like fiat currency, the Bitcoin owner doesn’t like commercial banks, and I think that those are both things that most of us precious metals owners also own.
When some of these people cash in their Bitcoin, where are they going to put that money? Some people are going to be selling here and they’re going to look for a place to put it. And it won’t take much to move things around in the precious metals market.”
While it hasn’t been easy for gold and silver investors to accurately assess monetary conditions and then sit around and watch virtually every other asset class explode, the crypto market is still a positive development. Not only is money leaving the dollar and entering a community that is well aware of the problems with fiat currencies, but public attention of what metals owners have so long been aware of is continuing to grow.
Even the crypto speculators who might not be able to tell the difference between a crypto, a gold coin, and a football are at least brought into the conversation. Regardless of their initial reasons for investing, with the market going up and the mania continuing to build, even pure speculators are being introduced to the reality that the dollar is on borrowed time.
Just imagine when they then run into a precious metals investor who explains that not only do gold and silver have similar characteristics, but that they are still trading at close to their cost of production. Especially with so much volatility in the crypto sector, it certainly seems that as profits continue to grow that gold and silver would represent an excellent source of diversification. Given the gains, especially over the past month, seeing money flows into precious metals could be in the near future, assuming it hasn’t already begun.
So if you’re watching the stunning moves and feeling a little left out, remember it’s just one more factor to support a move higher in gold and silver. And given everything else that is happening in the world, one has to wonder if such a move won’t be coming much sooner rather than later.
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