Gold Steals Bitcoin’s Spotlight As Inflation Fears Hit Investors For Real

Gold Steals Bitcoin’s Spotlight As Inflation Fears Hit Investors For Real
Image by Sumanley xulx from Pixabay

Yerevan (CoinChapter.com) – Gold price continued to rally as the inflation in the US crept north of 4 percent, invoking fear in investors and traders. Meanwhile, Bitcoin (BTC), the cryptocurrency that presented an effective hedge throughout the pandemic crisis in 2021, was still consolidating after the devastating crash since May 13.

The plunge was partially initiated by Tesla, the electric car mogul that ceased accepting BTC as payment for their vehicles. The crypto market cap further declined after May 19, when the People’s Bank of China banned all association with crypto, deeming it illegal.

The Central Bank of South Korea also voiced concerns about the volatility of the Bitcoin market, fearing financial losses. The institution pledged to monitor crypto transactions to make sure the average citizen is not subject to losses or fraud.

Bitcoin has yet to recover as it traded at $38,486 in the London session Thursday.

BTC still consolidating. Source: BTCUSD on TradingView.com
BTC still consolidating. Source: BTCUSD on TradingView.com

Institutional investors chose to secure their funds through shares invested through regulated Bitcoin derivative markets, which pose fewer risks. Grayscale Bitcoin Trust (GBTC), one of the major investment vehicles for institutions, suffered losses as its bids went down alongside BTC/USD spot rates.

GBTC bids declining. Source: GBTC on TradingView.com
GBTC bids declining amid inflation. Source: GBTC on TradingView.com

While the crypto market counted its losses, investors no longer saw it as an effective way to secure against the growing inflation. They flocked to gold, the historically trusted source to hedge their assets. J.P Morgan, a US-based financial giant, also noted the change of flow back toward gold, and away from Bitcoin.

Gold vs inflation

The physical gold price has been rising since May 13, the very day the crypto crisis unfolded. It managed to gain 3 percent to date. Also, the treasured asset seemed to form an inverse correlation with Bitcoin. It had been declining throughout 2021 when Bitcoin soared in price. Many experts believe gold’s bullish trend is far from over.

Edward Moya, the senior market analyst at OANDA, a New York-based trading broker, voiced his opinion on the current gold rush. He asserted that the $1,950 per oz is not as high as the asset could rise. The analyst saw more bullish moves for the yellow metal in the future.

Gold was trading at $1,898 in the European session Thursday, with a relative strength index (RSI) around 70. The reading pointed that the asset is overbought and hinted a decline shortly is also possible.

Gold price rising, as Bitcoin failed to recover after the crash. Source: GOLD on TradingView.com
Gold price rising, as Bitcoin failed to recover after the crash. Source: GOLD on TradingView.com

Investors’ fear of looming over inflation and growing national debt are among the factors that helped the golden bull, thinks Peter Grosskopf, the chief executive of Sprott, a global investment manager.

Meanwhile, the US dollar…

…is exhibiting worrying signs of decline. The US dollar index (DXY) approached its year-to-date low on May 25, only to correct slightly. The DXY curve on the chart below indicates the dollar’s strength against a basket of top fiat currencies worldwide.

Read more: Bitcoin Supporter Stan Druckenmiller Makes Serious Warnings About US Dollar

DXY once again approached its 2021lowest value. Source: DXY on TradingView.com
DXY once again approached its 2021lowest value. Source: DXY on TradingView.com

With inflation on the rise, institutional investors sought a safe hedge for their funds. Many of them turned to Bitcoin throughout 2021, as the cryptocurrency was booming. However, considering the recent decline, they turned to a more stable asset for safety. Gold prices soared, and many experts believe the bull will not turn into a bear any time soon.

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