(Kitco News) – Stocks, cryptos and gold tumbled Friday as the U.S. dollar climbs amidst rising recession fears.
Friday, the S&P 500 fell 1.7% by market close, Bitcoin fell 1.1%, and gold saw a decline of 1.7%.
The pain is not yet over for risk assets, said Gareth Soloway, Chief Market Strategist of InTheMoneyStocks.com and Co-Founder & President, Verified Investing Education.
On Ethereum, the long-awaited Merge that occurred on September 15 was not enough to propel prices higher, as many crypto investors were anticipating, Soloway noted.
“The key here is to just understand the type of market we’re in, and when you’re in a bear market, it takes a lot to get price to go up because people are scared. If you’re in a bull market you could have the tiniest bit of news and price will rip up. It could even be news that’s not relevant, and we’ve seen stocks like GameStop, AMC, all these things just go to the moon. But the problem is we’re in a bear market and in a bear market people really need value, they need to know that something is immediately changing. The Merge isn’t doing that. Yes, long-term it’s probably fantastic for Ethereum but in the near-term, what is every focusing on? The Federal Reserve, interest rates, the U.S. dollar, the economy, and all of those things are just crushing risk assets right now,” Soloway told David Lin, Anchor for Kitco News.
Cryptocurrencies
Soloway said that cryptocurrencies, especially the larger coins like Bitcoin and Ethereum, will continue to trade in tandem with the stock markets. He is maintaining his downside target of $600 for Ethereum.
On Bitcoin, Soloway’s base-case downside target is between $12,000 to $13,000. The last time Bitcoin saw these levels was July, 2020.
“If the dollar continues to strengthen, and the Fed seems to want to make sure that it does, then you’re going to break this $18,000 to $19,000 level, and your next stop is that $12,000 to $13,000 level,” he said. “That’s my best case.”
Bitcoin last traded at $19,215. Soloway said that a further decline beyond the $12,000 support level could happen if financial conditions deteriorate further.
“Worst case you have to look back to the doc com era, when Amazon dropped 95% during that collapse, and if that’s what crypto is going through you could be looking at a $3,500 worst case scenario target on Bitcoin,” he said.
Stock Market
U.S. stock market indices are headed towards their pre-pandemic highs, Soloway said, even after posting the worst single-day drop since June, 2020 on September 13, and declining another 7% after that.
“The markets are headed down. I think we’re oversold near-term, so it wouldn’t shock me to see a bounce next week, but at the same time, I still think the COVID highs just before March of 2020, that has the target written all over it by year-end, that’s at around 3,385,” he said.
Soloway’s comments come as Goldman Sachs on Friday cut its year-end forecast for the S&P 500 to 3,600 points, or roughly 16% downside from current levels.
Gold Price Outlook
On gold, Soloway said that the selloff on Friday can be attributed to a case of panic selling across all asset classes that brings everything down together.
“When COVID hit in 2020, you saw risk assets sell off, you saw gold sell off, you saw cryptos sell off. And so, there’s a point where you start to get a close to a bounce in the markets, and this could be any market, where people are just throwing everything out the window. And I think that’s what we’re seeing today. You have interest rates that are just freaking people out, the dollar just keeps ripping up, that’s freaking people out, and people are just saying “you know what, I’m exiting everything at this point and I’ll ask questions later’. Now we will probably see things like gold start to recuperate faster like we did during the COVID collapse, but that’s what’s happening right now,” he said.
Soloway noted that gold will continue to be the outperforming asset this year compared to stocks and cryptocurrencies, and the odds are that the gold price will climb from current levels by the end of the year.
For more information on what’s driving the current market sell-off, watch the video above.
Follow David Lin on Twitter: @davidlin_TV
Follow Kitco News on Twitter: @KitcoNewsNOW
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.