Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Predicting The Gold Price With The Bitcoin Price

|Includes: SPDR Gold Trust ETF (GLD)

I just recently heard about this alternative currency: Bitcoin. Apparently this is a digital currency that is standing on its own and has a total market value of $150 million. It came into existence in 2009 with the creator Satoshi Nakamoto.

I don't advocate using this digital currency as it is nothing you can really hold in your hands. But it's interesting to analyze it.

If a bitcoin is really a currency that is existing out of the "system", then it should follow the price of gold closely.

And looking at charts 1 and 2, you can clearly see that the tops in July 2011, January 2012 and September 2012 are found in both charts.

The weird part though is what is happening from October 2012 onwards. As the value of bitcoin soared to $20, the gold price didn't keep up with the trend.

So we now have a disparity between the two charts and it points to an either lower bitcoin price or a higher gold price. If we extrapolate the trends, we see a gold price of $1800/ounce compared to the price of a bitcoin.

It also points to the overall trend, namely higher gold prices. The rising bitcoin trend is holding itself up very well, so I believe gold should follow closely in the next few months.

And the most important thing to see is the following. If you have very good eyes, you will see that the bitcoin price is a leading indicator. The peak of bitcoin prices is always first and then we see a peak in the gold price a few weeks later.

So actually, we have here another tool to predict the gold price. Just follow the bitcoin price and buy gold when it goes up.

I'm sure as hell saving this bitcoin chart to my favorites.

Disclosure: I am long AGQ.