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Bitcoin - a digital currency with no government backing - soared in price from $1,000 to $19,343 in 2017. That's an amazing 1,834.3% gain.
Because Bitcoin isn't backed by any government, some investors view it as a hedge against political instability and stock market corrections.
That is, until it dropped to $12,629 by Dec. 30...
Suddenly, Bitcoin lost 34.71% of its value in 14 days as the stock market continued to rally.
Over the same period, the price of gold climbed from $1,242 to $1,310, for a 5.5% gain.
Which leads us to the question we keep receiving...
The answer is both, depending on your financial goals and risk tolerance.
Investors willing to accept high risk and volatility for the chance at massive gains can buy Bitcoin.
Urgent: Executive Editor Bill Patalon just saw something on his precious metals charts he's only seen twice in 20 years. He calls it the "Halley's Comet of investing" - and it could lead to windfall profits. Read more...
Since falling to $12,629 on Dec. 30, the digital currency has climbed back up to $15,187 in just four days, for a 20.25% gain.
But as a hedge against uncertainty and political instability, Bitcoin should only be bought if you believe the U.S. government will collapse and the U.S. dollar will no longer be the world's reserve currency.
(If you're interested in buying Bitcoin, be sure to check out our complete how-to guide here.)
If you're hedging for any other reason, gold is a better investment.
But gold isn't just a hedge, it's also on pace to return investors huge profits in 2018. We'll show you our bullish new price target for 2018, as well as our shocking 2020 prediction, in just a bit.
First, here are three reasons why gold prices will soar this year...
Reason to Buy Gold No. 1: Rising Inflation
Rising inflation will drive the gold price higher in 2018.
The current 2.2% inflation rate is its second-highest level in the last five years. That number is expected to move even higher as the stock market keeps reaching record highs.
Inflation is the rate at which the price of general goods and services rises and the purchasing power of the U.S. dollar decreases.
That's why the U.S. Federal Reserve manages inflation by raising interest rates. This has kept inflation from getting out of control as the stock market rises.
But there's been a growing sense of uncertainty among investors as the stock market keeps hitting records. Rising inflation often convinces people the economy is growing unstable, which can cause investors to exit the stock market.
Since assets like gold are considered safe havens during times of economic uncertainty, gold prices will rise as people protect themselves.
And that's only the first reason we're raising our gold price forecast...
Reason to Buy Gold No. 2: Fewer Short Bets
Reduced short selling in the gold market also indicates the price of gold will rise over the next three years.
Over the last year, the number of short positions on gold stocks has fallen. One indicator of short interest is the Gold BUGS Short Index (NYSE: HUISH). This index tracks short selling on mining firms that specifically refuse to cut gold production based on gold price movements. In the last 12 months, HUISH has dropped 9.27%, indicating short interest in the broad gold sector is falling. This shows a shift in sentiment from bearish to bullish for gold.
Canadian gold mining company NovaGold Resources Inc. (NYSE: NG) shows an even starker change in sentiment. In the last six months, the volume of short bets on the stock declined 32.75%, from 19.05 million shares to 12.81 million.