The price per troy ounce of gold has been under pressure since Friday, falling from over $ 1,800 to around $ 1,700. At the same time, Bitcoin (BTC) is once again making a name for itself as a store of value and an alternative to gold.
The economic consequences of the corona pandemic are still reflected in the price developments of important asset classes. This is particularly painful for those investors who want to protect themselves from inflation with gold. In the past five days, the troy ounce of gold has temporarily dropped from a good 1,800 US dollars to 1,690 US dollars and is currently leveling off at a good 1,700 US dollars. At the same time, Bitcoin (BTC) – often called “digital gold” – rose from around 40,000 US dollars to a good 45,000 US dollars.
There are several obvious reasons for these opposing developments:
- One factor behind the slide in gold prices is likely to be the strength of the dollar. Because the value of the US dollar against the euro is currently strengthened by the fact that the unemployment rate in the US is falling faster than forecast. This, in turn, is seen as a sign that the US is nearing the end of its lax monetary policy. In this way, interest-bearing asset classes such as government bonds are becoming more attractive again.
- Gold is often traded as a future and with leverage. This gives price developments their own dynamic, as traders have to limit losses. Experts like Peter Brandt see here the main reason for the unusually strong downward movement in the gold price.
- Long-term investors are increasingly considering Bitcoin (BTC) in their strategies. Because here the data paint a clear picture, like Bitcoin advocates Brian Lockhart shows: Viewed over ten years, gold as an asset class is currently slightly in the red, but over the last year it is down 17 percent. Bitcoin, on the other hand, can look back on plus 280 percent over the last year and even on an incredible 470,000 percent plus over ten years.
With the motto “Bitcoin is the new gold”, the younger generation is justifying a shift of reserves from fiat and gold in the direction of BTC. When that move hit major US corporations in the fall of 2020, led by MicroStrategy, Bitcoin started a rally that rose to over $ 60,000 per BTC by April 2021.
What is happening now can be interpreted as a situation in which investors have to readjust their strategies. Successful vaccinations also lead to economic growth in the euro area and China, combined with considerable inflation risks. Investors are asking themselves the question: is it time to get out of stores of value like gold and bitcoin and trust the policies of the central banks, which interpret inflation as a temporary phenomenon? Or is Bitcoin still an asset class that belongs in every portfolio, with significantly greater chances of winning than gold?
Conclusion: gold weakness is an argument in favor of Bitcoin
Scoffers are already joking that gold should rely on the slogan “analogue alternative to Bitcoin” in marketing. However, it still seems premature for that. Because the price of BTC has not been as stable over the last few days as the crypto scene hoped. In the USA, uncertainties about stricter taxation and regulation of cryptocurrencies are fueling doubts that have spread to Europe. But one thing remains to be said: The decades-long cultivated image of gold as a safe haven in uncertain times has been scratched – and Bitcoin has actually begun to establish itself as an alternative here.
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