Last week, gold smashed past the $3,000 mark for the first time in history.
Some analysts believe the precious metal’s rally could signal a shift in investor sentiment as global markets brace for economic uncertainty.
Why Is Gold Pumping?
In a long thread on X, capital markets analysts The Kobeissi Letter highlighted several factors that have driven gold’s recent rise. According to them, the all-time high isn’t a fluke but the result of a perfect storm. Geopolitical tensions, soaring inflation, and investors’ flight to safety have all contributed to gold’s high-flying performance.
Central banks around the world have been stockpiling the precious metal at record levels, with purchases exceeding 1,000 tonnes for three consecutive years. In the analysts’ opinion, this institutional demand has significantly reduced supply, adding upward pressure on the asset’s price.
Demand for physical gold has also spiked, with inventories in major vaults skyrocketing 115% in just two months. Observers believe this is a sign of investors rushing to the safe-haven asset amid fears of recession, inflation, and a ballooning U.S. deficit spending. Furthermore, the American government’s annual expenditure of $7 trillion, similar to levels last seen during the pandemic, has eroded confidence in fiat currencies.
But perhaps the most surprising factor is gold’s resilience against the U.S. dollar. Renowned Bitcoin critic and vocal gold advocate Peter Schiff recently noted that the metal’s rise has come despite a strong USD.
Historically, when the dollar performed well, it tended to dampen the price of gold, but last year, the commodity shrugged off this trend, rising alongside high interest rates and a sturdy greenback. Schiff argued that this unusual behavior could point to a breakdown in traditional market correlations, with gold now acting as a true safe haven.
Bitcoin’s Struggles: Why Isn’t It Keeping Up?
Interestingly, Bitcoin, an asset often described as “digital gold,” has not kept up with its physical counterpart. According to Schiff, in 2021, while one BTC could buy 36.3 ounces of gold, today, that figure has dropped to 27.7 ounces, which means that the cryptocurrency’s price has fallen by 24%.
“Gold is the apex predator that will eat Bitcoin,” Schiff smirked, addressing Strategy’s Executive Chairman, Michael Saylor, whose company has been on a BTC-buying blitz for several years now.
The Kobeissi Letter also suggested that gold’s 4,000-year track record as a store of value is hard to beat, especially with BTC being barely 16 years old and still finding its footing.
The cryptocurrency’s value has fallen in lockstep with the NASDAQ, seemingly reinforcing Schiff’s claims that it behaves more like a high-risk tech stock and less like digital gold. The outspoken economist feels that if the tech-heavy index enters a bear market, it could push Bitcoin into steeper losses.
However, despite recent drawbacks that saw the BTC slump to a four-month low, some experts have dismissed any correlation to traditional markets, claiming the asset has historically moved independently.
Currently, market watchers at CryptoQuant have said all of the cryptocurrency’s valuation metrics, including the Bitcoin Bull-Bear Market Cycle Indicator and the Market Value to Realized Value ratio, show that it is in bearish territory.
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