Key Takeaways:
- Bloomberg analyst predicted gold outperforming broad commodities.
- Bitcoin holds above the $60,000 support, while experts weigh in on its merits as an inflation hedge.
- Gold could go digital too, asserts a chief executive.
YEREVAN (CoinChapter.com) – Bitcoin price slid back to $61,382 ahead of the New York session Thursday, after a new all-time high of $67,016 on Oct 20. Meanwhile, the gold spot price is likely to increase in Q4 2021, according to Mike McGlone, the senior commodity strategist at Bloomberg Intelligence. He posted a chart to back his opinion and noted that the metals sector is “poised to keep outperforming broad commodities.”
The analyst’s chart also compared the yellow metal’s price action to Bitcoin Liquid Index (BLX) and the Debt-to-GDP ratio. In hindsight, the former measures a fair USD price point for one bitcoin at tick intervals of 30 seconds. The index is derived from the most liquid pools of trading activity across key marketplaces globally.
Debt-to-GDP (Gross Domestic Product) ratio compares what the country owes to what it produces. In a nutshell, it assesses whether the government can pay its debts. As seen on the chart, it moved in unison with the gold price in the past two years.
The BLX has been climbing up throughout 2020 and 2021, while the gold price and debt-to-GDP have been declining. Nevertheless, the analyst noted that the yellow metal is holding above the $1,700 line and could be ready for a new leg up. So, where does it leave Bitcoin?
Also read: Gold flash crashes as Bitcoin continues bullish trend.
Are Bitcoin and Gold rivals?
Investors have always used gold to hedge their assets against the instability of the fiat market. Bitcoin, often called ‘digital gold,’ assumed the safe-haven role after the Covid-19 pandemic. Many individual traders and companies like electric car giant Tesla and business intelligence firm MicroStrategy introduced Bitcoin to their balance sheets.
The alpha crypto rallied over 60% and established a new all-time high at over $67,000 on Oct 20. Moreover, it soared over 122% year-to-date, while the gold price dropped 7% and stood at 1,797 per oz in the New York session Thursday.
Some experts view Bitcoin and gold as rivals, preferring one asset over the other as an inflation hedge. Mohamed El-Erian, president of Queens’ College, Cambridge, and chief economic adviser to Allianz, thinks that the flagship cryptocurrency lured money away from gold.
There is an inclination now to look to Bitcoin as a portfolio diversifier, with inflation being one of the catalysts. Bitcoin has attracted money away from gold.
asserted the adviser.
Others, like financial giant JPMorgan’s chief executive Jamie Dimon, subscribe to the idea that Bitcoin is “worthless.” On the contrary, the billionaire investor Paul Tudor Jones recently told CNBC that he preferred Bitcoin to gold to hedge against inflation.
There’s a plan in place for crypto and clearly it’s winning the race against gold at the moment … I would think that would also be a very good inflation hedge. It would be my preferred one over gold at the moment.”
he said in the interview to Squawk Box.
Also read: Another reason why Bitcoin reached $67K: A Gold Exodus
Moreover, some experts believe that if gold wants to compete with Bitcoin, it “has to go digital.”
The future of Gold
As Mr. McGlone predicted a bullish quarter for the yellow metal, the CEO of asset management firm Sprott Inc. Peter Grosskopf, agreed. He also pointed out that in his view, the two assets are not on the outs.
The executive admitted that Bitcoin outperformed gold as an inflation hedge during the ongoing crisis, but only short-term.
In the long-term, they’re both going to the same place. When I look at bitcoin, I see investors who have pulled $2 trillion out of fiat currencies, and I love that. This just shows what kind of potential gold has.
said the expert.
Additionally, Mr. Grosskopf asserted that he sees a digital future for gold.
I think a lot of the technology needed to take gold digital has been proven. I expect that gold will eventually go digital, and that is going to create a lot of new users and investors.
he added.
In hindsight, Sprott Inc. deals heavily with the precious metals market. It has an AUM (assets under management) north of $18 billion and supports fintech projects. The company followed the CEO’s incentive and invested in several digital projects, including Glint Pay, a credit card that lets users hold their balance in gold.
