Gold struggles at $1.7K, Bitcoin at $20K — no safe haven

Key Takeaways:

  • Gold fell 16% and held above $17K.
  • The broad dollar surge was behind the bearish trend, but the risk-on assets didn't follow.
  • Bitcoin could head towards $12K in the current quarter.
Gold, Gold struggles at $1.7K, Bitcoin at $20K — no safe haven
image from medium.com

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.

Also read: Bitcoin Wyckoff accumulation setup sees BTC rising towards $30K by September 2022.

DXY pumps on Fed’s hawkish policy

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.

Gold vs. broad dollar (DXY). Source: TradingView.com
Gold vs. broad dollar (DXY). Source: TradingView.com

Also read: Bitcoin (BTC) to $12K next amid BTC’ tourist’ purge.

Bitcoin doesn’t help either

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.’

Also read: Bitcoin (BTC) price could fall to $10K, Wall Street survey finds.

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.

Bitcoin (BTC) daily chart featuring Bear Flag. Source: TradingView.com
Bitcoin (BTC) daily chart featuring Bear Flag. Source: TradingView.com

The bearish setup targets BTC price at approximately $12,000 in Q3, nearly 40% lower than the current value.

Also read: Another villain in Bitcoin market misery: Treasury Inflation Protected Securities (TIPS).

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.

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Gold, Gold struggles at $1.7K, Bitcoin at $20K — no safe haven

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