Gold Surges Amid Geopolitical Tensions as Bitcoin Trades Like Risk Asset, Weakening ’Digital Gold’ Narrative
Gold has overtaken the euro to become the second-largest global reserve asset in 2024, now making up 20% of official reserves and trailing only the US dollar at 46%. This shift is fueled by record gold purchases from central banks, especially in emerging markets, as a hedge against geopolitical risks and dollar dependency. Amid escalating Middle East conflicts, gold prices have surged 30% year-to-date, nearing $3,450 per ounce, driven by uncertainty and inflation concerns. In contrast, Bitcoin, once called ’digital gold,’ has only gained 13% YTD and trades 5.3% below its May peak. Analysts note that during geopolitical turmoil, investors still prefer traditional hedges like gold, with Bitcoin behaving more like risk assets such as equities. The ’digital gold’ narrative is weakening as traders focus on Bitcoin’s volatility and liquidity. Upcoming Federal Reserve decisions on interest rates and inflation are being watched closely, as policy shifts could affect Bitcoin’s near-term momentum. In the short term, oil and gold are expected to continue decoupling from Bitcoin, reinforcing its role as a risk-on asset rather than a safe haven. For crypto traders, this highlights an evolving dynamic between traditional and digital assets that could lead to changing correlations and volatility in the crypto market.
Neutral
Despite gold’s strong rally and increased status as a global reserve asset amid rising geopolitical tensions, Bitcoin has not mirrored gold’s price movement or safe haven appeal. Instead, Bitcoin has shown stronger correlation with risk assets like equities and has underperformed gold, challenging its ’digital gold’ narrative. Analysts suggest that institutional investors and traders continue to view gold as a primary hedge in times of crisis, while Bitcoin is treated more like a speculative risk asset. The upcoming Federal Reserve meeting introduces policy uncertainty, but expectations of no immediate rate changes indicate no major catalyst for a sharp shift in Bitcoin’s price behavior in the short term. Thus, the immediate news impact on Bitcoin is neutral: there is neither a strongly bullish nor bearish trigger, but increased volatility and decoupling from traditional safe havens should be monitored for possible market shifts.