Key Takeaways
- Some strategists think gold prices could theoretically rise more than 50% from current levels, which as of late Thursday were well above $5,400 an ounce.
- A measure of investor appetite for gold: The metal has outperformed bitcoin over five years.
Gold is looking more and more like the new bitcoin.
While bitcoin was dubbed “digital gold,” it’s analog gold that has seen its price mostly go up these days. Meanwhile bitcoin—after doing little for weeks—on Thursday slid almost 7% to below $84,000, its lowest point since November, according to Messari.
It’s likely that gold, which today fell in morning action but recovered and remains above $5,400, saw some profit-taking Thursday—to be expected, given that the haven asset has more than doubled over the last year. What’s eating bitcoin is harder to tell. Yet, between traders chasing gold’s rally, and investors seeking safety in it, the precious metal has clearly become the favorite.
WHY THIS MATTERS TO YOU
Bitcoin was supposed to a multi-use tool for investors, at once a momentum trade and a hedge. Neither appear to be selling points for investors lately as they pile into gold instead.
Gold’s recent run-up has helped it surpass bitcoin’s performance over the past five years.
More recently, investors until about July were parking money in both bitcoin and gold ETFs, playing what is called the “debasement trade,” an expression of general investor anxiety whether it’s about the declining dollar or persistently high government debt. That inflows into gold and silver ETFs toward the end of last year coincided with outflows from bitcoin ETFs, showed which investors preferred, according to JPMorgan.
“Retail investors continue to favour precious metals over bitcoin,” JPMorgan global markets strategist Nikolaos Panigirtzoglou and his team wrote in a Wednesday note.
That preference can translate to a meaningful rise in household gold holdings, which the firm estimates could rise from 3% of overall portfolios now, to 4.6% in the next few years. That higher level would imply gold prices at $8,000 to $8,500, JPMorgan wrote.
Investors are meanwhile stepping away from bitcoin in a range of ways. Ned Davis Research this week booted bitcoin and digital assets form its Trump Trade Index: The iShares Bitcoin Trust (IBIT) and ARK Blockchain & Fintech Innovation (ARKF) ETFs, the latter which holds stocks like Coinbase (COIN) and Circle (CRCL), are out of the index, though an allocation to gold via the SPDR Gold Trust (GLD) remains.
“Crypto seems to have taken a lower priority for the administration and the Clarity Act, which should clarify federal regulation authority for digital assets, has stalled in the Senate,” Pat Tschosik, the firm’s chief thematic strategist, and Philippe Mouls, wrote in a note yesterday.