The pandemic due to the COVID-19 pandemic continues to affect our lives and the number of new corona-infections are reaching a new high. There are several vaccines in the development stage and it seems that a vaccine might be available next year. In the meantime, the governments are trying to keep the global economy afloat with stimulus packages and pushing new money into the system. During these times, more investors are keenly keeping their eyes on gold to protect their savings against inflation.
The Federal Reserve has printed approximately 3 Trillion USD to mitigate the financial and economic pains of Covid-19 on the US economy. So far, the United States has not felt the consequences of the devaluation, as the US dollar continues to have the status of a reserve currency. However, if the government continues to print money at such speed, it may not be long before the dollar begins to lose its value. When a currency as important as the US-dollar suddenly begins to lose its value, money begins to move into asset classes that can hold value. Especially Gold and even Bitcoin as an alternative asset class. (1)
When Gold was first compared to Bitcoin, the comparison received strong and negative feedback. Today, however, more and more analysts believe that the comparison between gold and Bitcoin is justified because the price movements of both asset classes react similarly to the current economic situation.
Analysts say cryptocurrencies (especially Bitcoin) and gold are responding similarly to the widespread fiscal and monetary stimulus stemming from the COVID-19 pandemic.
Greg Harmon, the founder of Dragonfly Capital, is also looking at bitcoin and gold as stores of wealth. He added that he sees the cryptocurrency leading the precious metal higher. (2)
“Gold is a lot more established and is a much bigger market so it’s going to take time to get enough moment for a big move. Bitcoin is a lot more agile. Gold is like a supertanker in the ocean, and bitcoin is more like a coastguard vessel.” (2)
“I wouldn’t call bitcoin the new gold because you can’t replace an asset that has for thousands of years been a store of value,” said Wells Fargo head of real asset strategy John LaForge. “However, Bitcoin is a digital store of value, and that is important for some investors. The correlation between bitcoin and gold has never been higher.” (2)
Read also our previous article where we compare Gold and Bitcoin. Technical information, the outlook for Gold, and potential price movements
Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.