What’s happening: The price of gold has jumped almost 5% since the invasion of Ukraine two weeks ago. Before long, it could surpass the all-time high of $2,072 per troy ounce that it reached in August 2020.
Bitcoin is trading around 4% higher. He rallied on Wednesday after President Joe Biden signed an executive order directing the US government to examine the risks and benefits of creating a digital dollar.
However, it registers much larger fluctuations than gold and remains more than 40% below the record it reached last November.
Cryptocurrencies have held up better than stocks since the start of the war. In the past, their exchanges were more closely correlated.
Indeed, the aggressive sanctions cutting off Russia from access to the global financial system have raised bets that some countries and institutions will begin to look more seriously at other ways to move money around the world. Crypto networks will benefit.
“The reason why he somewhat retained [its value] is the market that sees it as an alternative to traditional finance,” Lux Thiagarajah, head of trading at BCB Group, told me.
The number of transactions exchanging Russian rubles for bitcoins has increased since the invasion, according to data from Arcane Crypto. Although this is still only a small part of global transactions, it supports a larger narrative that cryptocurrencies have real value.
“We can definitely see some Russians using bitcoin as a hedge and to protect their savings,” GlobalBlock analyst Marcus Sotiriou told me. This reinforces “the idea that bitcoin can act like digital gold,” he added.
But BCB Group’s Thiagarajah disagrees. He pointed out that Russians turning to bitcoin are very different from investors who see it as a safe bet. Its price remains extremely volatile, which does not inspire confidence in institutions that want to preserve their heritage.
“We don’t view bitcoin as digital gold,” he said. “Gold is by definition a safe haven.”
Take a step back: JPMorgan analysts have calculated that if investors start treating bitcoin like gold, its value could reach $150,000, or about four times its current level. Yet the war in Ukraine does not appear to be a watershed moment, as the debate continues.
The focus shifts from Ukraine to inflation, briefly
Stocks surged and oil prices plunged on Wednesday as investors pinned their hopes on diplomatic talks between Ukraine and Russia. But as the war enters its third week, the mood on Wall Street has once again turned sour.
The latest: A meeting between the foreign ministers of Ukraine and Russia in Turkey ended without an agreement on a ceasefire. Global oil prices, which fell 13% on Wednesday, rose more than 3%. Shares also fell, erasing some of the previous day’s gains.
Attention now turns to the latest inflation data out of the United States, which has a major influence on policymakers’ next steps.
The consumer price index, which measures a basket of goods and services, stood at 7.9% in February, the Bureau of Labor Statistics reported Thursday. This is the highest level since January 1982.
The Federal Reserve intends to start raising interest rates later this month as it tries to rein in prices. But he doesn’t want to go so fast that he triggers a recession – a task made more complicated by the war in Europe.
Last week, Fed Chairman Jerome Powell told Congress he supported a 0.25 percentage point rate hike in March. That killed speculation that the Fed might opt for an oversized rate hike to show it was serious about fighting inflation.
But Citi economists Veronica Clark and Andrew Hollenhorst believe an above-normal increase could still be on the cards later this year if data shows inflation remains strong. That’s one of the reasons they plan to take a close look at today’s numbers.
“Inflation data will still have important implications for hikes beyond March,” they said in a note to clients this week.
Amazon’s stock is about to get much, much cheaper
The company announced Wednesday that its board of directors had approved a 20-to-1 stock split, its first since 1999. If approved by shareholders in May, it will go into effect in early June.
Breakdown: Amazon closed Wednesday at $2,785 per share. If the split were to take place immediately, Amazon stock would be worth $139 per share.
The new price excites Wall Street, as it could lead to a larger investor base. Amazon shares are up 5% in premarket trading.
“The existential rise of low-fee and no-fee trading apps means that stock splits are bigger than they have been in some time,” said Hargreaves Lansdown analyst Sophie Lund-Yates.
Amazon also said it would buy back $10 billion of its stock. Such a move usually helps to inflate the value of the stock because it effectively means taking the stock offering out of the market.
Investor insight: The news could give Amazon shares a much-needed boost. Its shares are down 9% in the past 12 months, lagging other big names in tech. Microsoft shares rose 23% over the same period, while Apple shares rose 35%. Alphabet, Google’s parent company, which also announced a stock split earlier this year, is up 31%.
Also today: The latest reading for the US Consumer Price Index is released at 8:30 a.m. ET.
Coming tomorrow: Consumer sentiment data for March from the University of Michigan survey.