Investors Seeking Safe Havens Hoard Gold — Physical as well as Digital
Investors are increasingly hoarding gold and bitcoin as conventional safe havens in US bonds and the dollar have come up short.
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It’s no surprise Costco keeps selling out of gold bars (and pet hoodies, but that’s a different story). The price of gold hit another record yesterday, breaking $3,500 an ounce before pulling back, and JPMorgan predicted the precious metal’s value could climb past $4,000 in the next year. The asset has risen more than 25% already this year.
At the same time, bitcoin recaptured the $90,000 mark yesterday, at its peak sitting 22% above its April low. Bitcoin ETFs added $381 million on Monday, their biggest single-day jump since January and their fifth straight day of gains.
The dual rally of gold and bitcoin backs up the idea that some investors treat bitcoin as digital gold, buying up the crypto with the belief that it’ll maintain its value through tough times.
Padding the Digital Wallet
While bitcoin and gold have both risen this month, the S&P 500 has lost 9% and the US Dollar Index has declined 5%, as of yesterday’s market close, as investors rearrange their portfolios to protect their net worth from increasingly uncomfortable times.
- The market is being driven by extreme fear, according to CNN’s Fear and Greed Index, as POTUS wages a global trade war. Adding to the uncertainty, the White House is said to be looking into how to fire Fed Chair Jerome Powell, a move critics say could spark an epic selloff.
- Meanwhile, the US dollar, which typically gets a boost in uncertain times as investors opt for the liquidity of cash, is instead experiencing a dramatic decline. Since the beginning of the year, the US Dollar Index has tumbled 9%, the worst decline for the period in the index’s four-decade history.
So instead of stashing cash under the mattress, investors seem to be looking to gold and bitcoin to shore up their portfolios. While gold has historically been considered a safe-haven asset, bitcoin’s classification as one is hotly debated, and earlier this month, bitcoin was tracking closer to tech stocks than to gold.
The dollar’s decline could be a key factor in bitcoin’s uptick. In his annual letter to shareholders earlier this month, BlackRock CEO Larry Fink pointed out that a weakening dollar might prompt investors to flock to the cryptocurrency.
On a Breakaway: Bitcoin’s not just showing early signs of decoupling from tech stocks but also from other cryptocurrencies, Bloomberg’s Joe Weisenthal pointed out. That would set bitcoin apart from the rest of crypto as an asset that’s perceived to be less risky. But while bitcoin and gold may be besties for now, a wide range of factors affect bitcoin’s value and analysts expect its continued rise to depend on major catalysts like trade deals and interest-rate adjustments.
