Crypto News

Gold, Not Bitcoin, Emerges as Safe-Haven as CPI Levels Shoot Up

gold chosen as safe haven not bitcoin
Gold, Not Bitcoin, Emerges as Safe-Haven as CPI Levels Shoot Up

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.

Read More: Bitcoin Week Ahead Ep06: CPI report meets bearish pennant structure

bitcoin, Gold, Not Bitcoin, Emerges as Safe-Haven as CPI Levels Shoot Up
Investors Started Booking Bitcoin Investment Profits At $65,000 Top, Source: BTCUSD on TradingView.com

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.

Read More: Bitcoin breaks below $32.5K as Donald Trump calls it “scam” against the dollar

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.

bitcoin, Gold, Not Bitcoin, Emerges as Safe-Haven as CPI Levels Shoot Up
XAU/USD Downtrend Reversed From April 2021, Source: XAU/USD on TradingView.com

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.

bitcoin, Gold, Not Bitcoin, Emerges as Safe-Haven as CPI Levels Shoot Up
Gold ETF Fund Flows, Source: WGC

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.

How useful was this post?

Click on a star to rate it!

Himadri Saha

Himadri is an active investor in cryptocurrencies and upcoming blockchain technology projects. He has been a part of the digital asset space since 2017 and has held multiple positions as Social Media Manager, Assistant Editor, Sponsored Content Manager, Cryptocurrency Journalist roles in reputed news outlets like NewsBTC, Bitcoinist and CryptoPotato. He has also helped numerous blockchain projects gain prominence through terse and succinct marketing/technical content. Himadri comes with a marketing and engineering background, and has worked with reputed names such as GE Healthcare, Volvo Trucks and Polycom before moving into crypto.

Related "Bitcoin" News