Gold, long considered a key investment asset and a hedge against inflation, is under pressure. Bitcoin, often referred to as "digital gold," is reaching historic highs, signaling a potential shift in investor strategies.
Gold Declines While Bitcoin Surges
On November 14, gold prices dropped to a one-month low of $2,543 shortly after the release of the U.S. Consumer Price Index (CPI). Inflation in the U.S. reached the expected 2.6% for October. Despite a subsequent rebound to $2,623, gold remains down 2.6% over the past 30 days.
Conversely, Bitcoin reached a new all-time high of over $93,400 just hours after the CPI data was published. This development highlights growing investor interest in Bitcoin while gold’s appeal continues to wane.
Trump’s Policies and Their Impact on Gold
According to Maruf Yusupov, co-founder of the gold-backed stablecoin Deenar, Donald Trump’s focus on cryptocurrencies, taxes, and tariffs could significantly diminish gold’s attractiveness.
“While gold has a centuries-old reputation as a hedge against inflation, a shift in focus toward Bitcoin could challenge its dominance,” Yusupov stated. “Investors may redirect their funds into Bitcoin, potentially fueling a rapid rally.”
Additionally, the hawkish stance of the Federal Reserve, involving interest rate hikes, could restore economic stability but further erode gold’s appeal. Yusupov noted that investors might favor Bitcoin for its relatively higher return potential.
Long-Term Challenges for Gold
Yusupov believes the strengthening of the U.S. dollar could make gold less attractive in the long term. “As the dollar strengthens, the need for gold or other hedges could become increasingly redundant,” he added.
Furthermore, Republican Senator Cynthia Lummis proposed on November 17 that the Federal Reserve sell part of its gold reserves to accumulate Bitcoin as a national reserve. As of Q2 2024, the United States holds 8,133 tons of gold reserves.
The Future of Gold in the Age of Bitcoin
Gold faces significant challenges with the rising influence of Bitcoin and cryptocurrencies. If investors continue to shift their preferences toward digital assets, it could mark a profound change in how traditional hedging assets are perceived in the future.
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,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“
