Gold: 3 reasons it's like Bitcoin

The bubble will burst, so take some profits off the table now.

By Traders Reserve Apr 23, 2013 9:35AM

Gold © Stockbyte SuperStockBy Jamie Dlugosch

The power of fear is amazing to me.

For the most part, otherwise sane individuals will do all sorts of crazy things once things become a little bit dicey.

Want proof? Look no further than the gold market. How else can you explain the massive move in an otherwise worthless metal over the last decade? And then there's Bitcoin, the digital currency. I'll get to that in a second.

If you are honest, ask yourself what real utility is there for gold? Don't recite what the so-called analysts or experts tell you about gold being the only real currency in the world (it is not). Those folks will tell you that gold is the only thing that will protect you and your family when things go horribly wrong (fear mongering).

Really, what do you think the world is going to be like if things do really go horribly wrong? I highly doubt that gold bar will get you much if chaos truly takes hold.

Presses printing money

How about inflation?

Those who love gold spew all sorts of nonsense about inflation -- again, all of it is fear-based.

The global powers are printing money across the globe. All that money is going to make paper currency worthless. Prices across the board are going to rise in an unrelenting, unstoppable wave of inflation.

Oh, really?

If there is so much cash out there. Where in the world is it? I know I don't have it, do you?

For inflation to truly take hold there needs to be cash dispersed to the masses. That isn't happening. Not even close.

I'm sorry, but aside from being used in jewelry, gold does not have the utility the market is telling you today, even with the recent selling.

Sure there has been a ton of money made owning gold over the last decade, but that has little to do with true value of gold in a market. What it does tell you is that there is a ton of fear out there and that fear can create a massive bubble in any investment.

The hot new currency

Take for example, hmmm . . . let me see . . . Bitcoin.

You know about Bitcoin, that supposedly hot new digital currency that everyone must have. Come on. Admit it, gold owners. You gave serious consideration to adding some Bitcoin to your portfolio or maybe you actually pulled the trigger and bought some before it collapsed.

You might laugh at the lunacy of Bitcoin, but is it any different than the lunacy of gold?

The answer is no, no and no again. Here are three very simple reasons why gold is like Bitcoin:

  1. All bets are off during the apocalypse. I'm pretty sure those dreams of buying a loaf of bread with your gold coins during Armageddon might not be as easy as you think. A better currency in that situation might be your gun and its ammunition. Or maybe gasoline, since transport will take on premium value if such a disaster were to occur. I guarantee you the zombies will scoff when you try to pawn your gold for anything of real value in such a scenario.

  2. When the air comes out of the bubble, the pain will be very real. A near 10% drop in the price of gold in one day is nothing. Bitcoin lost $100 in value in a matter of moments. Gold prices could see the same. Those gold ETFs have disaster written all over them. When the money starts to flow out, there will be nothing to backstop the selling. Ten percent is nothing to what could happen when gold really starts selling off.

  3. What someone needs to tell me is how gold and Bitcoin are not different. I suppose it is ultimately the market. At the moment, the market is telling us that gold is indeed a real currency and Bitcoin is not, but frankly the two are more similar than they are different and that should be cause for alarm for anyone owns gold.

I can imagine the hate mail and negative comments I might get for raising this issue, but I stand by my beliefs: gold could collapse no differently than what happened with Bitcoin.

If you own the yellow metal, don't be a fool. Take some of those fat profits off the table before it's too late.

More from Traders Reserve

Apr 23, 2013 9:51AM
What Utility does gold have? Heck, other than Food, Water, and Shelter you can literally say the same about everything else. Fact is, what matters is what people VALUE outside of the essentials of life. Gold has been valued long before Stocks, Bonds, and I-Phones. It will be valued long after Stocks, Bonds, and I-Phones.

Gold is nothing like Bitcoin. You would have to be completely off your rocker to make such a comparison. It's not out of bounds to say one might be uncomfortable with the current price of Gold considering historical prices and how far and fast it has moved. At the same time, folks are far more uncomfortable with the massive Global Money Printing. Just because the Big Banks don't care to lend it out to anyone other than the elite doesn't mean it isn't there. It's there and far more than most can imagine. And it's growing.

Apr 23, 2013 11:09AM
Jamie Dlugosch,

I'm about to enlighten you my friend. Takes notes, there will be a quiz shortly after. Seems your uber drunk on Keynesian Kool-Aid with artificially flavored fiat sugar.

Worthless metal? Gold and silver have been around for over 5,000 years as a form of sound money dating all the way back to Sumeria and the Egyptians. Gold is rare, difficult to mine, can't be created or printed, keeps government treasuries from over borrowing, spending and honest. Gold, Silver, Platinum, Palladium all have useful industrial and scientific properties. It's one of the reasons why our founding fathers unlike you, knew this and inscribed it in Article I, Section 10 of the U.S. Constitution to "only coin Gold and silver as legal tender" and NOT fiat currency until the 16th amendment came along in 1913. Since then, Fed induced monetary policies, over printed fiat currency and inflation have managed to erode and destroy the power of the dollar 90% since then. You forget your history. What happened in 1971 when Nixon took the U.S. off the Gold standard's last bastion?Hyper inflation, unemployment, high interest rates, spiraling debt ensued for the next decade. Ever since then the U.S. has experienced a gradual increase in perpetual debt and economic bubbles. How am I doing so far? Fiat currencies have collapsed and folded throughout history on average every 50-75 years (seems you refuse to acknowledge this history lesson) always defaulting back to Gold and Silver as the remedy for the back bone of sound money. Your precious fiat ETF/Stock currency is artificially created, mismanaged and over-printed with no real intrinsic value other than an official promissory statement from an institution or government that states "legal tender". The massive money printing hasn't made it to the masses because the mega-banks have it, go research it, it's out there. Look at the balance sheets of BOA, Goldman Sachs and other "too big, too fail"  institutions. They're massive. The Fed knows that if QE landed in the streets, it's a game changer and game over. Bitcoin is a form of fiat currency it's a disingenuous comparison to Gold or Silver and not even remotely in the same asset allocation class. Your off base and off topic. If anyone jumped on the Bitcoin wagon it was those that were afraid of a currency collapse and couldn't afford Gold. The precious metal markets are due for a correction. I'm not arguing that fact. The markets are all cyclical. Even if the air lets out of the Gold bubble, it will outlast any fiat currency given the current global economic malaise with no real solutions except papered over band-aids. The fractional reserve banking ponzi schemes, astronomical insolvent pension & entitlement programs are all the ammunition I need to win this argument. In the long run Gold will defeat Bonds, fiat currency, stocks and ETFs. Here is the dire difference, never before in the history of mankind has there been such a global contagion of  unprecedented government and private debt circumventing the entire planet and near government defaults by first world nations. The influx of multinational central banks creating fiat currencies and balance sheets with nothing tangible or a means production to substantiate the asset classes other than offsetting the mathematical inevitability of a monetary collapse world wide through QEs is staggering and monumental. We are reaching that precibus in the not so distant future.
Apr 23, 2013 10:25AM
I would rather harbor some fear than be a fool.  Gold was money long before the dollar and it will be money after the dollar. Bitcoins are a logical progression of money . In fact if you look at the requirements for money, bitcoin has much potential. purely digital currency will play a more prominent role in society with each passing year. Also, we are human, gold has an allure that paper money or digital money will never have.
Apr 23, 2013 10:20AM
A very convincing article; looks like Bitcoin is the wave of the future if it is even remotely as enduring and valuable as gold!
One other question that has always been nagging, is that if an "apocalypse" does occur, just how will these bread companies, car manufacturers, refineries and firearms suppliers survive without a viable currency to buy and sell raw materials, goods and pay employees? Seems there is a HUGE piece missing from this illogical puzzle... Bitcoins perhaps?
Apr 23, 2013 11:03AM
Bitcoin is a ledger of accounts that pretty much replicates a checking account.  If you have a Bitcoin address with some Bitcoins in it, you can pay people and they can pay you.  Your business can "direct deposit" into your account.  You can make transfers into other accounts you might open.  You can make international payments.  Or you can just save your money in your account.

Bitcoin is secured with 256 bit, hyper-paranoid encryption technologies.  More than you use for online banking (128 bit) , and more than banking is required to use to conduct transactions between banks (128 bit).

And did I mention that these Bitcoin Addresses are free?  You don't have to sign a contract?  That nobody can touch your Bitcoin without your private key? That you can generate your Bitcoin addresses yourself, off line, without any possible way someone can hack and get that key?

No ability to send a "bad check".  No overdraft fees.  Very small transaction fees.  No holds on payments, no charge backs, no counterfeiting.  

Most of the Gold in the world is stored in vaults.  With actual people guarding it.  You need bathrooms and janitorial services, corporations, and managers, all to keep Gold safe.  And still people wonder if the Gold in the vaults is really there!  How can anyone tell?  Auditing Gold bars (to make sure they are not cleverly weighted fakes) is actually kind of hard! 

Amazingly, Bitcoin is stored more securely over the entire Internet in thousands of computers that run the bitcoin system!  

Gold has other useful purposes (even if they don't justify its value, as you say).  Bitcoin doesn't.  It is good as money, and nothing else, so you are not tying anything up 

You can not make small purchases with Gold directly.  What, 1/1500 of an ounce for a candy bar?  But you can spend .00000001 Bitcoin with ease.

You cannot secure Gold easily against theft AND use it at the same time to make purchases.  Carrying around Gold simply is dangerous.  Someone can take it away from you.  Obviously Bitcoin can be carried in a phone, a hardware wallet, or just accessed over a terminal.  Secured with passwords and encryption.  Most Bitcoin wallets can be stolen physically from a person, and do the thief no good at all, unless they can break 256 bit encryption.  At  which point why bother?  Just go and get one of the public accounts with a big balance and break the encryption and steal the money!  But.... Nobody can.  And as far as anyone can tell, nobody will every be able to.

And if I want to spend Gold on the Internet?  Where is the USB to Gold conversion cable?  Can't be done.  Can do that with Bitcoin!  

Bitcoin has intrinsic attributes which make it very useful as a currency implementation.  And on top of those, its value cannot be tweaked by banks and government.  It provides a model that allows the market place to make economic decisions based on a nearly fixed measure of value (Bitcoin).  As these advantages propel the adoption and use of Bitcoin, the demand will go up, and Bitcoin's value will go up.  

That's why Bitcoin isn't exactly a "Bubble".

What we are seeing is the chaos of a "Land Rush".  People that get it, Buy Bitcoin, and Hold Bitcoin while services and companies, and users all come up to speed and get online, those people are going to win big.  Applications that smooth transactions, and insure security are needed, but they are also coming very soon too.

None of this discussion makes any sense in the context of Gold.  And thus, Gold isn't anything like Bitcoin, even if it has some attributes that hints that it is.
Apr 23, 2013 11:03AM
Inflation hasn't hit because there is no growth. But when comes growth, there will be inflation.
Apr 23, 2013 11:10AM
Inflation is the increase in the money supply NOT price increases.The rise in prices is the symptom.Problem is, the velocity of money has cratered.Why?Because banks are not lending and that money never makes into the productive hands of the middle class.

When your entire paradigm is constructed on little pieces of paper being printed into oblivion and arbitraged against other little pieces of paper also being destroyed(Japan),the last thing TPTB want is for people to seek out hard assets.As for the real reason metals have been smashed?Over 500 tonnes of gold were sold on the COMEX last Monday.This is clearly fraud and yet another attempt to keep people out of PMs.The strategy has backfired,though.The lower they drive the prices,the more physical is bought now as people are no longer fooled by these episodes of manipulations.

This article is just more noise form the corporate shills.The morons who have total faith in the printing press and ZIRP will get theirs in the end.

One last question: What will happen when interest rates go up and the $600T in interest rate swap derivatives reset? KABOOM!!!

Enjoy your paper,folks.I'll stick with my gold and silver,thank you very much.
Apr 23, 2013 10:39AM

In the past 20 years investing has basically become betting. Bet Apple sells a ton of cool products and the price goes up. Bet Google has millions of clicks and the price goes up. Problem is when you run out of cool NEW products or cool new advertisers that don't sign up in droves, the price of stocks goes down as the momentum fades. We are living in a world of lemming (momentum) investors with analysts and computer programs chasing the hot new thing. So, do you thrust that paper currency will be there for you buying the same amount in 20 years? Most people do not. Now, look at ETF's for Gold and Silver, they have dropped dramatically because they are basically paper.


So individual investors (along with many in Asia, etc.) have hedged by buying physical gold. Not a lot, but just a little gold and silver. The ETF's are selling off as the momentum players chase something new, but physical silver is NOT really dropping in price. Try to buy 1 oz silver eagles right now, most are $35 ounce. Gold eagles have actually recovered some. Is it investing? Probably not. is it hedging? Yes. Will the value of silver tank to $5 an ounce... I don't think so. For some, it might bring a little piece of mind as opposed to watching stocks get hammered like 2008. The US coins are really cool and you can always use a stack as a paperweight or give them away as presents! I would not go all in on metals, by a 100 oz of silver in the safe isn't going to hurt anybody.

Apr 23, 2013 11:48AM
I purchased gold and silver as an insurance policy to supplement my other investments in real estate, money market, a few stocks and cash. My metals investments are around 5%. This is what is called diversification. He/she is one of these anti-gold misinformed who does not understand this concept, and probably can not afford to buy gold. So, there is that. Like others have said, gold has been used for thousands of years as a form of money. Too bad that the author is ignorant of that fact. In conclusion, I would advise anyone to diversify and not put all your eggs in one basket. This article would have made more sense if it had. Another fact is that countries hoard their gold. Since the price went down countries like India and China are buyers. Shame that ignorant people are allowed to publish such rubbish.    .
Apr 23, 2013 12:45PM

Well, first of all, inflation will hit us hard when the economy is humming again, the question is when will that happen?  That is the plan of central banks, when the economy really recovers, the inflation will go through the roof and because everyone is partying like it's 1999 again, they are hoping that no one notices the rocketing prices.  This is the time you'd want to have gold assets or real estate for sure.


I would take gold over bitcoin any day, you can't manufacture gold, there's only so much inside planet Earth and there will never be more than that.  It doesn't tarnish or get consumed.  With bitcoins, I'm sure there is at least 1 person somewhere who can electronically counterfeit a gazillion of those things and make it the worthless currency that it is.

Apr 23, 2013 11:46AM

All articles about gold have a fanatical tone to them.  Either you think the world is coming to an end or you think that those who do are kooks.


I think there is a middle ground between gold being busted as the ultimate scam and complete collapse of paper currencies.  Obviously global central banks are devaluing their currencies with QE, but this does not necessarily have to end in disaster.  Obviously gold has been a perceived store of value for thousands of years, but that does not necesarily mean that it will do well in every possible future outcome. 


I have trouble investing for the zombie apocolypse or thermonuclear war,  no one left to cash out with.  That said gold is a useful hedge against uncertainty and probable paper currency debasement.  But other things may be good too.



Apr 23, 2013 2:47PM

This has to be the godamest dumbest thing I've EVER READ....

The thought of COMPARING Gold to a Bitcoin....I'm still shaking my head...


Jamie I've read much of your stuff over the YEARS, where the hell did you ever come up with this??

Sweet Geezus....!!

Apr 23, 2013 7:39PM
You are obviously an arm of our "free" government,and I don't think you should have the right to breathe the same air as me.Gold is most definitely more sound than ANY paper currency,anywhere.The bankers will be judged for their piracy of our money,we can only hope that happens sooner than later.I won't count on it since bankers have propped up our gov't. in hard times in the past, and naturally,we OWE them for that.Any bankers imprisoned for raping the American taxpayers?No way.Did taxpayers ever get a bailout at our own expense? NO. end of story
Apr 23, 2013 10:54AM

bitcoin has value primarily because it's rare (only 21M will ever be created), it's useful (you can send payments in it across the internet like email), and it's free as in liberty (not subject to capital controls).

the biggest risk to bitcoin is lack of understanding - what they are, how to buy them, and how to use them.   i'd recommend a bitcoin starter kit to anyone interested in btc.

Apr 23, 2013 11:16PM
Bitcoin is like an e-wallet. Gold is tangible and has a long history as a store of value. You fail to mention in your bias article that, paper can become worthless overnight also.  Bitcoin is not for me, I would worry about cyber attacks and power failure if we were attacked.  Let the market decide.......lots of suckers out there.
Apr 23, 2013 3:17PM

Active...I would argue about the Gold and "two swimming pools" thing....

But it is much easier to Agree to Dis-Agree, then both of us making fools of ourselves..


I've heard and read so many facts and fallacies, about Gold "above ground" that it can make ones head spin...

And I do believe you have to take Jewelry out of the Equation...??

Apr 23, 2013 3:09PM

I'm not here to trounce Gold or anything to do with it..It is a store of Value; And it can be VOLITILE.


BitCoins are some dreamed up piece of shidt...That someone invented(guess Japanese ?)

Who cares....??

Reminds of the Same Generation, that be will driving down the road, texting on their I-phone about their Bitcoin Account (and what value it is, in the last half hour)...

While they drive 50 MPH into the back of a STOPPED SEMI-TRUCK, hope it's not my G-Kid.

Or for that matter, anyone's Kid...

Yes, they have Gold coins, that have different denominations??, just not used many places.

They also have daily "spot values" that don't normally jump all over like a "beancoin."


Apr 23, 2013 5:39PM
I've got a million bitcoins, where can I cash them in....I want Swiss Francs, please..
Apr 23, 2013 3:29PM

I'm pretty sure when we have an Apocalypse....

That your Laptop or Tablet will become a BRICK...Or a stone you can skip across the pond..

And the bragged about Bitcoins will evaporate, like a fart in the Wind...


I laughing so hard I can barely type....

What's that you say Mister, that Jingly in your pocket; " It's Gold??"

"C'mon In....We need to talk..."

That kid down the street, said he had Bitcoins in his pocket....I said "whaaat" ???

Apr 23, 2013 12:39PM

When I can use gold in any retail story, then I would by some. For now, Fiat money works for me.
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