Bitcoin is impressive, but gold stands on its own

[View this email in your browser]( [Youtube]( [Kitco Metals]( Editor's Picks [@neils_C]( We have spent the last few weeks highlighting the dramatic differences between [gold]( and [bitcoin]( and the question many are asking has been how big of an impact has Bitcoin’s rally has had on the gold market. [Investors got a definitive answer Friday as the gold futures market ended the week with a record closing price.]( The precious metal managed to rally 2% this week as Bitcoin prices pushed to $64,000 an ounce. What the digital currency has accomplished this year is unprecedented for any financial asset. [BlackRock’s Ishares Bitcoin ETF (Nasdaq: IBIT) has seen its assets under management reach $10 billion and at the fastest pace on record.]( Ryze Labs analysts put Bitcoin’s achievement into perspective for Kitco Crypto: “It took State Street’s gold ETF, $GLD, two full years to reach a similar milestone. Moreover, while $IBIT represents just 0.2% of BlackRock’s total ETF AUM, it has accounted for 42% of this year's inflows.” This is nothing but astounding, but that doesn’t take away from what gold has achieved. Despite elevated bond yields and persistent strength in the U.S. dollar, gold has not only managed to hold significant support at $2,000 an ounce but continues to achieve new records in its own right. Talk to analysts Friday, there is some doubt as to whether this rally in gold is sustainable. Where there is growing bullish sentiment in the marketplace, it can probably be better described as cautiously optimistic, as this rally doesn’t have solid fundamental support. Gold has been coiling in a tight trading range for a few months now, so it’s not surprising to see an outsized move as some pressure was released from the market. Even if this proves to be a false breakout, investors have once again seen what gold can do when momentum shifts. According to analysts, the market needs to see material weakness in the U.S. dollar for gold to maintain this momentum. That could come sooner rather than later. Looking beyond short-term market gyrations, we continue to see signs that the U.S. dollar’s dominance in global financial markets continues to weaken. A report that caught my attention Friday was from Capital Economics. The British research firm noted that 2023 was the fifth weakest year for world trade since the 1950s. We don’t know if this trend is sustainable, but there has been a lot of talk about the growing deglobalization movement. Nations worldwide continue to work furiously to develop their own domestic supply chains. At the same time, geopolitical turmoil continues to draw distinct lines between allies and opponents. Even if trade does recover from the dismal 2023 levels, it’s unlikely to see any material growth. In this environment, the role of the U.S. dollar as the world’s reserve currency will continue to be challenged. The U.S. dollar won’t lose its global status anytime soon, but gold remains an attractive alternative for nations looking to diversify their holdings. Of course, it’s not just potential wars that will drive geopolitical demand for gold. This week, [analysts at HSBC published an interesting report that looks at gold as a possible hedge against climate change that is adding to the world’s geopolitical uncertainty.]( HSBC’s comments came a month after research from the World Economic Forum said that the climate crisis is now considered the top risk facing the world in the long term. The analysts noted that despite the ambiguity of climate change, there are measurable factors that can impact and support long-term gold prices. “Global economic contraction has a positive impact on the return volatility of gold, and climate change can reduce economic growth,” the analysts said. “The latest economic modeling shows that a 2.2 degrees Celsius temperature rise by 2050 could reduce global GDP by up to 20%, which would have profound consequences across countries.” So yes, Bitcoin’s achievements are impressive, but in the end, gold will remain an essential, timeless asset. Have a great weekend. Neils C. 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