Bitcoin hit a record. The price of a coin advanced past the $69K, then shortly dipped below $60K, and is now settling at around the $65K. Volatility is high as the coin flirts with new record levels. The latter attracts new interest and speculation, of course. Fundamentally, though, the demand is surging thanks to the introduction of new spot ETFs which made cryptocurrencies easier to invest for institutional players. Halving due in April means that the Bitcoin supply will be divided by two. Higher demand and lower supply points at a higher price. We should still figure out where we can use Bitcoin, but the ‘to-the-mooners’ have all the reasons to believe that Bitcoin could hit $100K per coin.
In the More Traditional Space
Gold rose on safe-haven demand walking into the Federal Reserve (Fed) Chair Jerome Powell’s testimony before Congress. Powell is expected to ask policymakers for patience before cutting interest rates. The US economic growth remains resilient, the jobs market remains hot – remember the last two NFP prints in the US were above the 300K mark, and disinflation has given signs of slowing at the beginning of the year. Due today, the ADP report is expected to print around 150K new private job additions and we might see lower job openings. A sufficiently soft data would make Powell’s job easier into the first rate cut, while a stronger-than-expected set of data will keep the Fed watchers wondering whether the Fed should cut rates anytime at all this year.
Gold is higher on expectation that the lofty equity valuations could finally lead to a sizeable downside correction and gold could serve as a hedge. Even though higher yields – that would result from a hawkish shift in Fed expectations – are not favorable for the valuation of gold, the size and the amplitude of a potential market selloff could help investors look past the higher opportunity cost of holding the non-interest-bearing gold and push the price of an ounce further up.
But keep in mind that the major US equity indices do not necessarily react to yield changes since AI disrupted the negative relationship between equity valuations and the US yields.
Sour Apple
Apple (NASDAQ:AAPL) is not having a good time. The stock price fell another 2.84% yesterday on news that its iPhone sales in China fell 24% over the first six weeks of the year. iPhone’s market share in China fell below 16% from 19% a year earlier. Huawei amassed some good demand and increased its own marker share from below 10% to above 16% over the same period. And it’s not only China. The company is coming too late to the AI race, which makes it vulnerable to any broad market selloff unless it comes up with a project that would excite investors. It was removed from Goldman’s high conviction list and it’s no longer in Evercore ISI’s tactical outperform list. The stock price is in a free-fall mode. Earlier this week, the $180 support was broken, and yesterday the stock fell and closed below a key technical level: the major 38.2% retracement on the bullish trend forming since the beginning of 2023. Technically, the stock has now stepped into the medium-term bearish consolidation zone and could extend losses to $162 per share, the 50% Fibonacci level.
Elsewhere
The Bank of Canada (BoC) is expected to keep its policy rate steady today and the UK Chancellor of the Exchequer will reveal the budget. He is expected to aim for tax cuts to please British voters, but he has a limited margin and some tax cuts could lead to inflationary pressures prompting the Bank of England (BoE) to maintain a tighter monetary policy for an extended period, which may further burden mortgage payers. Hunt should find a fine balance.
The 10-year gilt yield fell to 4% and Cable is testing the top of this year’s downtrending range. It’s up to Jeremy Hunt to keep the market at this sweet spot.