The cryptocurrency, often referred to as “digital gold,” has soared 217% this year through Thursday, stirring speculation it was beginning to replace gold as the safe-haven asset of choice. Gold, meanwhile, was up 24% this year.
“We do not see evidence that Bitcoin’s rally is cannibalizing gold’s bull market and believe the two can coexist,” wrote a team led by Jeffrey Currie, global head of commodities research at Goldman Sachs. “Bitcoin is the retail reflation trade while gold is a defensive asset with long-term real capital preservation.”
Bitcoin has acted more like copper, a proxy for global growth, rather than a defensive asset since the lockdowns began in March.
The development of a COVID-19 vaccine has caused the price of risk assets to soar. Bitcoin’s price has climbed 49% since Nov. 9, when Pfizer and BioNTech announced the positive results of their Phase 3 trial.
The vaccine-driven risk-on rotation has come at the expense of gold and other safe-haven assets. The precious metal fell as much as 9% since the vaccine was announced before trimming its losses. Gold set a record high of $2,051.50 an ounce on Aug. 6 and settled at $1887.20 on Thursday.
“Such aggressive rotation historically doesn’t last too long as investors quickly re-balance their portfolios,” Currie wrote, noting that rising inflation expectations, a weakening dollar and stretched valuations in some risky assets will support safe-haven inflation hedges next year. He sees gold reaching a new record high of $2,300 an ounce.
The precious metal's spike to a new all-time high comes as economists predict a return to growth for the U.S. economy following a year upended by both the COVID-19 pandemic and a tumultuous presidential election. Gold's long-term price levels typically reflect changes in the value of consumer goods, and a run-up is unlikely to negate that trend, investors say.
“Gold gives you a good perspective on things because in reality, long term, it's not the price of gold that goes up, but the purchasing power of the dollar and every other fiat currencies that goes down,” Peter Schiff, CEO of Westport, Conn.-based Euro Pacific Capital, told FOX Business in March.
“People like to say 200 years ago, 250 years ago, a man could buy a nice suit for an ounce of gold," he said. "And that's the case today.”