Gold Soars to All-Time High Amid Global Instability: Will Traders Now Turn to Crypto?
Gold soars to new record highs amid global economic uncertainty, fueling investor interest in cryptocurrencies. l Credit. Jaque Silva/SOPA Images/LightRocket via Getty Images
Key Takeaways
- Gold has reached unprecedented heights, driven by a combination of factors.
- Global economic instability, geopolitical tensions, and a potential shift in US monetary policy are key drivers of the gold price surge.
- Cryptocurrencies, particularly Bitcoin, are gaining attention as alternative safe-haven assets.
Gold prices are soaring, and experts predict this upward trend will continue. As the Federal Reserve gears up for its next meeting, some experts are betting that gold could hit a record-breaking $3,000 an ounce within the next 12 months.
The driving force behind this surge is global economic uncertainty. With investors on edge, many are seeking shelter in alternative assets — and cryptocurrencies are seemingly emerging as a solid option.
Gold To Top $3,000
Gold prices have continued their upward trajectory, with spot gold holding steady at a record-breaking $2,508.14 per ounce, according to FactSet data . Naturally, US gold futures increased by 0.2% to a new all-time high of $2,540.8 per ounce, building on the previous week’s gains.
Considering the recent performance, Citi analysts are optimistic about gold prices. They predict a price of $3000 per ounce by mid-2025 and an average price of $2,550 per ounce for Q4 2024.
However, not all analysts share the same level of optimism. ING experts, for example, expect a more modest average gold price of $2,380 per ounce in Q3 and a peak of $2,450 per ounce in Q4, resulting in an annual average of $2,301.
They believe that the Federal Reserve’s potential rate cuts will be the primary driver of gold prices, with geopolitical events also playing a significant role.
Still, with two quarters left in the year, gold’s 20% surge isn’t going unnoticed, and many expect this number to only grow.
What’s Behind The Surge?
Gold’s impressive 20% increase can be attributed to factors such as geopolitical tensions, anticipated interest rate cuts in the US, and robust demand from central banks.
Antonio Ernesto Di Giacomo, Senior Market Analyst at XS, told CCN: “One of the main drivers behind this historic surge has been the expectation of a more dovish monetary policy from the US Federal Reserve.
“With the possibility of further interest rate cuts and increased quantitative easing, financial markets have responded predictably, driving up the price of safe-haven assets like gold. The prospect of a weakened dollar has made gold more attractive to both domestic and international investors,” the analyst said.
“Additionally, instability in geopolitically sensitive regions, such as Ukraine and the Middle East, has significantly driven this rise. Ongoing tensions in these areas have created an environment of uncertainty, leading investors to seek refuge in gold, considered a safe asset in times of crisis. Geopolitical instability has acted as a catalyst, further boosting the demand for this precious metal”, he added.
According to gold market experts, declining bond yields and a weakening dollar have further amplified the asset’s allure. As interest rates on bonds have fallen, investors have sought assets that offer better returns and protection against economic uncertainty.
Gold has emerged as a compelling alternative, drawing a growing investor base. Additionally, the dollar’s depreciation has made gold more affordable for international buyers, bolstering global demand for the precious metal.
Interestingly, while traditionalists look toward gold amid global uncertainty, they are also looking at alternative asset classes like cryptocurrencies.
Will Traders Turn To Crypto?
Bitcoin is often likened to gold and real estate as a store of value, essential for hedging against inflation. However, its status as a ‘safe-haven’ asset was questioned following a stress test on Aug. 5. While gold is up 20% this year, Bitcoin has outperformed with a 35% gain, despite a recent dip that cut its year-to-date gains from 77%.
Trader Peter Brandt recently highlighted the rivalry between Bitcoin and gold as hedges against inflation. Brandt noted that the volatility of the BTC/Gold ratio doesn’t negate Bitcoin’s long-term growth potential. He suggested that while short-term fluctuations may occur, the ratio could rise significantly in the future, making Bitcoin a strong store of wealth.
However, Brandt advises a diversified investment approach, including both assets, to manage risk.
Laith Khalaf, head of investment analysis at AJ Bell, on the other hand, was a contrarian, sharing that gold has outperformed Bitcoin during unstable periods.
“Bitcoin’s volatility makes it unreliable as a store of value or inflation hedge. Although Bitcoin is currently in favor, it is prone to significant downturns, making timing crucial for any potential gains. Research indicates that most Bitcoin buyers from 2015-2022 likely lost money due to poor timing, despite the cryptocurrency’s overall price increase,” he stated.
“Gold remains a valuable portfolio diversifier but should only constitute 5-10% of a portfolio. While it’s known as a safe haven, gold is volatile and has experienced long periods of returns below inflation. Investors considering Bitcoin should only do so with money they can afford to lose entirely.” Khalaf continued.
Nik Bhatia, founder of The Bitcoin Layer, argues that Bitcoin is too young to be considered a true safe haven like gold. He states that Bitcoin often behaves like a risk-on asset, and its recent drop alongside global stocks illustrates its maturity challenges.
This diversification can be particularly valuable when traditional assets falter, as cryptocurrencies may follow a different performance trajectory.
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