Stocks & Commodities V. 31:8 (39): Explore Your Options by Tom Gentile

Stocks & Commodities V. 31:8 (39): Explore Your Options by Tom Gentile
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Explore Your Options by Tom Gentile

Gold: Rusty Metal or Buying Opportunity?

Gold sure has gotten a lot of press so far in 2013. The metal started out the year on a high note — the first week of January saw gold at its highest levels for the year so far. Since then, gold has been on the decline, and in April it dropped off a cliff, taking a 10% plunge in just two days. As the bitcoin seems to be the “new thing” in decentralized currencies, gold had lost its short-term luster to investors. This digital phenomenon is the reason why gold may only be on a temporary drop, potentially to bounce back as everyone’s favorite by year’s end.

Is the bitcoin the “Internet bubble” of the currency markets? The bitcoin is a creation that has been around for only a few years now. Supposedly, a man using the name Nakamoto laid the foundation for digital currency. Bitcoins are paid when someone cracks a series of computer-coded mathematical problems. Once one of the algorithms is cracked, the miner receives bitcoins. As more and more bitcoins are mined, the algo gets harder and harder to crack until eventually there are no more bitcoins to mine. A bitcoin is a decentralized currency, meaning that no government can control it. There is also anonymity in how a bitcoin is spent. It’s traded directly from point to point, with no bank or reserve keeping track of how it’s swapped. Nakamoto limited the number of bitcoins to be produced, which is pegged to 22 billion. Roughly half of the allotted bitcoins have been “mined” from various computers thus far.

Mt.Gox became the first exchange to trade bitcoins as a currency. Some companies even use bitcoin as a form of currency with which to buy and sell. A report recently came out that someone accepted bitcoins for the purchase of a Porsche automobile. Some investors believe the bitcoin is the best hedge against inflation, deflation, and outright depression. The only problem is that the US government isn’t going to allow this currency to circulate without some form of regulation. Some bitcoin counterparts have been frozen or shut down for illegal money-laundering tactics, as the Feds call it.

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