In the month of March we witnessed an almost historic event with both gold and Bitcoin recording the highest price ever reached at practically the same time: above 2,200 dollars / ounce for the yellow metal and around 70,000 dollars for the cryptocurrency more famous. Something never seen before since gold has always represented the safe haven par excellence, suitable for the most complex market phases, while Bitcoin has tended to do well when the propensity for risk on the financial markets is high and obviously the two things do not happen at the same time , as the Bloomberg graph over the past decade shows well:
What is going on ? Regarding gold, which we must always remember, is a safe haven asset that has existed for thousands of years, which has shown its investment capacity capable of maintaining purchasing power during wars and phases of high inflation, we are witnessing strong purchases from part of the world central banks who are supporting the price. After decades of partial sales of their stocks or in any case of non-presence on the market, the central banks of many countries, especially emerging ones, are purchasing large quantities of gold (1023 total tonnes in 2023, source World Gold Council). There is a logic given the return to higher inflation levels on average, the very tense geopolitical situation, the desire of some countries such as China and Russia to hold assets in American dollars but which are not government bonds made in the USA. Let us remember that in the 70s and 80s the average percentage of gold held by central banks out of their total reserves ranged between 40 and 65%; after the decline in the 90s and 2000s it dropped to a minimum close to 10%. Today we have risen towards 15% with a theoretical room for growth that is still very high as you can see from the Crescat Capital / Bloomberg graph. Just for the record, a hypothetical return to average values of 40% would imply approximately 3,200 billion dollars in purchases, equal to approximately 40,000 tons of gold which represents almost 10 years of total supply of the yellow metal.
On the Bitcoin side, however, we are observing a strong increase in financial investments (doubled in the last 6 months) thanks mainly to two factors, one that has just happened and one arriving this month. In January the American regulator SEC, the local Consob, approved the establishment of “physical” ETFs on cryptocurrency and therefore allowed these trackers that can be purchased by any saver to invest in Bitcoin directly and not through other instruments such as futures or derivatives. This resulted in huge inflows into new ETFs that were ready for use having been set up awaiting approval from giants such as Blackrock or Fidelity. The second element is the next Bitcoin halving, a technical term that indicates the halving of the quantity of Bitcoins that can be produced and which will arrive on April 19th. The last few times this has happened (the phenomenon occurs due to the “constitution” of the cryptocurrency every 4 years), Bitcoin has then risen significantly. Here too, it is useful to point out that Bitcoin is a much more recent instrument having been around for just over a decade, much more volatile than gold, which has no intrinsic value and which has made price corrections from the highs several times in the past. above 80%.
So where will we place ourselves on the safe haven side in the future? Nobody knows and therefore we can only report the official data to date which tell us that the count is around 65 billion dollars invested in ETFs/Trusts on Bitcoin compared to around 185 billion invested on the yellow metal. Today, gold still has a clear advantage despite the presence of investments that have fallen from a maximum of 225 billion in 2020, given that the behavior of private investors has for now been opposite to that of central banks. This is an anomaly in the presence of a rising gold price as can be seen from the Bloomberg graph which clearly shows how the two variables usually travel hand in hand; We don't believe the anomaly will last long.
Stay tuned.
