The ongoing rally in bitcoin appears to be overshadowing gold’s traditional allure, sparking debates about the future of precious metals in the global economy. Dubbed “digital gold,” bitcoin is gaining ground as a store of value for the internet age, raising questions about its impact on gold, long considered the ultimate safe-haven asset.
Krysta Escobar of CNBC highlights the growing competition between the two, noting that bitcoin’s surge has distracted attention from precious metals. George Milling Stanley of State Street Global Advisors cautions against abandoning gold for bitcoin, arguing that the latter’s volatility undermines its reliability as a safety asset.
“Investors who treasure gold’s safety qualities should reconsider piling into bitcoin,” Stanley warns. He points out that the crypto industry’s adoption of the term “mining” was a deliberate attempt to liken bitcoin’s creation process to gold extraction, capitalizing on the precious metal’s historic aura.
Shifting Dynamics in the Bitcoin-to-Gold Ratio
The bitcoin-to-gold ratio underscores the shifting dynamics. Currently, one bitcoin can purchase approximately 35 gold bars, nearing the all-time high of 37 recorded in 2021. This marks a significant leap from a 9:1 ratio at the beginning of last year and a mere 0.9 before the 2017 crypto bull market, as Dorothy Neufeld of Visual Capitalist explains.
Gold, trading at $2,648 per ounce, has gained 28% this year but has struggled to maintain October’s record highs. A clear US election outcome, which eased fears of prolonged uncertainty, has reduced demand for traditional safe-haven assets. Moreover, a stronger dollar and market expectations of higher-for-longer interest rates have further weighed on gold’s performance.
Outflows and Uncertainty
“Gold has endured a sharp loss of momentum,” notes Marcus Ashworth of Bloomberg. This month alone, $1.4 billion has flowed out of the main US physical gold exchange-traded fund (ETF), as investors pivot towards other opportunities. Even China’s central bank, a long-standing structural buyer of gold, appears hesitant to purchase at current elevated prices.
Despite these challenges, Goldman Sachs maintains its bullish outlook for gold, predicting it could reach $3,000 per ounce by the end of 2025. Analysts point to an unpredictable Trump presidency, potential tariff disruptions, and soaring US deficits as factors that could rekindle interest in the yellow metal.
While bitcoin’s rise continues to captivate investors, gold’s historical resilience suggests it may yet reclaim its shine in times of economic turbulence. For now, however, the crypto revolution seems to be stealing the spotlight.
