Robert Armstrong notes that gold has outperformed the S&P 500 this year, surprising the community of often stubborn gold sceptics (“Gold goes for it”, Unhedged, August 21). He may be even more surprised to learn that bitcoin — the digital alternative to gold — has performed even better, and largely for the same reasons.
Both physical gold and digital bitcoin compete in international markets with the US dollar as stores of value — assets expected to hold their value in real terms over time. The prospect of Fed rate cuts, economic and geopolitical uncertainty, as well as new sources of demand are driving the prices of both gold and bitcoin higher this year. In the case of gold, the buying seems to be coming from central banks and Chinese retail investors. For bitcoin, the arrival of spot-based ETFs in the US market opened access to the crypto asset class for many new investors, retail and institutional alike.
Investors that are concerned about macro risks and are looking to diversify their portfolios should consider allocating to gold, bitcoin, or both.
Zach Pandl
Head of Research, Grayscale Investments, Stamford, CT, US