Analysts at J.P. Morgan suggest that increasing geopolitical tensions and November's presidential election are driving investors towards gold and bitcoin
J.P. Morgan analysts are observing a trend among some investors, known as the "debasement trade," which is driving them towards gold and bitcoin as safe-haven assets amid increasing geopolitical tensions and the upcoming U.S. presidential election in November.
In a note on Thursday, J.P. Morgan Global Markets Strategy analysts Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole and Krutik P Mehta said that this preference for both gold and bitcoin is part of a broader strategy as some investors grow less confident in fiat currencies, particularly in some emerging markets.
"Rising geopolitical tensions and the coming U.S. election are likely to reinforce what some investors call the 'debasement trade' thus favoring both gold and bitcoin," the analysts wrote. "This preference for both assets is part of a broader strategy as some investors grow less confident in fiat currencies, particularly in some emerging markets."
While gold initially showed a muted response to recent geopolitical events, its price has risen sharply over the past quarter, reaching the $2,700 level on Sept. 26, they added. This increase is influenced by a 4-5% decline in the dollar and a significant drop in real U.S. Treasury yields by 50-80 basis points. However, the analysts noted that the appreciation of gold exceeds what these factors alone would suggest, indicating a re-emergence of the ‘debasement trade.’
A recent CryptoQuant post on X also highlighted historical trends where lower U.S. Treasury yields led to rising gold prices. "In 2008, as the 13-week Treasury Bill yields decreased, gold prices soared from $590 to a peak of $1,900 per ounce by 2011," the post said. "A similar trend is emerging now, with gold climbing from $2,000 to nearly $2,700. Bitcoin ( BTC ) BTC, -1.07% , often seen as 'digital gold,' may follow this pattern."
However, CryptoQuant analyst J.A. Maartuun told The Block that despite the current declining yields and expanding M2 Money Supply, "gold is already profiting from these circumstances, while bitcoin isn't, resulting in a current negative correlation between bitcoin and gold."
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