Jaipur (CoinChapter.com) — It appears investors still prefer gold as the most appropriate asset to hedge against inflation. Bitcoin and the aggregated cryptocurrency market still make it to the list. But rising consumer prices in the US and production costs in China forced investors to assign the “safe-haven” status to the yellow metal. Again.
Investors Forced To Reconsider Safe-Haven Options
When bitcoin price continued its monumental rally to $65,000, and above, investors were already having a hunch about the top setting in. What followed next was an aggressive bout of profit-taking.
And while this happened, rising consumer prices in the US stoked fears of upcoming inflationary storms. The US Consumer Price Index rose 4.2% year on year from April 2020-2021. According to the U.S. Bureau of Labor Statistics:
The 4.2 percent increase in April is the largest increase over a 12-month period since a 4.9 percent increase for the year ending September 2008.
These fears strengthened when China reported a rise in production prices. According to the latest report by the Financial Times, China’s producer price index appreciated by 9% last month. This, as per the National Bureau of Statistics, is the “biggest year-on-year increase since September 2008 and higher than economists’ forecasts”.
Given the precarious bitcoin market conditions and rising global inflation concerns, investors chose to move their money to gold.
Gold Preferred Over Bitcoin As Inflation Hedge
Since August last year, the yellow has been in a state of perpetual decline until March this year. But things changed as the last year’s financial year ended and the next one began.
Fund movement was mostly negative in physical gold exchange-traded funds (ETFs) from October 2020 to April 2021. However, that scenario changed when capital inflows for gold ETFs flipped positive back again in May. According to the World Gold Council (WGC) data, global yellow metal ETFs attracted a combined total of $3.4 billion. This was a significant improvement since September last year.
The message was clear. Investors had chosen gold as their preferred bet to beat the upcoming season of inflation.
Bitcoin bulls have attempted several recoveries recently. But BTC market conditions remain shaky. So while investors across the world patiently wait for the latest numbers from the US, gold will still maintain its dominance as a haven.
But bitcoin prices are also leaning ‘oversold.’ While there are estimates of BTC revisiting the $20,000 level, a rebound is bound to happen. When? That remains to be seen.