YEREVAN (CoinChapter.com) – Gold and Bitcoin (BTC) jeopardized their fragile “safe-haven” status, dropping 16% and 60%, respectively, since their 2022 peaks. The precious metal’s spot price briefly bottomed out at $1,720 for an ounce on July 13 but settled around $1,730 in the London session.
Gold vs. Greenback
As CoinChapter reported, gold hit the $2,000 mark per ounce in March 2022, rising against the weakened economy and the dropping broad dollar. In detail, the broad dollar, or dollar index (DXY), measures the dollar’s strength against a basket of global currencies.
Gold has long-established its status as a hedge against inflation. As a result, investors responded to the uncertainty by directing their funds into safe-haven assets like precious metals. Subsequently, abundant inflow into the gold market boosted the XAU spot price.
However, the tables have turned since the peak. Citing the heftiest inflation rate in four decades, the Federal Reserve hiked the interest rates, boosting the DXY and dropping gold prices. The chart below illustrates the inverse correlation.
Meanwhile, Bitcoin fell alongside equities, despite the ‘digital gold’ narrative. The flagship cryptocurrency bobbed below the $20,000 support and maintained its correlation with risk-on assets.
Typically, risk markets like stocks, and since late 2021, digital assets, tend to flourish in times of economic stability, as investors are more open to a ‘gamble.’
Conversely, global turmoil and market volatility call for secure options to hedge funds, such as the gold market, which has been a historic sanctuary for centuries. Thus, Bitcoin’s inclusion in the risk-on category paved the way for more bloodshed.
However, the recent uptick in DXY did not save the stock market or digital assets. Instead, both tumbled significantly, with more room to fall.
BTC technicals bearish
Moreover, the flagship cryptocurrency formed a Bear Flag, a setup that occurs after a sharp downward move. It features a period of consolidation between two parallel trendlines that takes the price slightly higher before continuing on a bearish path.
If the technical prediction pans out, Bitcoin investors will not see rewards in Q3. Additionally, macroeconomic factors point to a bearish continuation. Gold, as a traditional sanctuary asset, does not yet provide a safe outlet against growing inflation. Will the economy stabilize in Q3?
The strengthening recession fears say no, so potential investors might want to tone down the ‘gamble’ factor.
Lilit is a Yerevan-based Markets writer, skilled in 3 languages, and interested in writing about the tech world, trading, art, and science. She also has a background in psychology and marketing, which helps deliver the right message to the target audience.
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