Goldman Sachs – Bitcoin Has Caused a Dent in Demand for Gold
Bitcoin’s (BTC) sharp price rally this year will have no impact on top conventional assets such as gold, as per a report published by Goldman Sachs, one of the world’s acclaimed investment banks.
In a note to investors, Goldman Sachs has guaranteed its customers that Bitcoin has not transformed into an existential threat to the yellow metal.
“We do not see evidence that Bitcoin’s rally is cannibalizing gold’s bull market and believe the two can coexist.”
Goldman Sachs acknowledged that Bitcoin’s continuing price rally could dent a portion of demand for gold from investors. The institution stated:
“Gold’s recent underperformance versus real rates and the dollar has left some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice. […] While there is some substitution occurring, we do not see Bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort.”
Against the backdrop of Bitcoin breaching all-time peak in December, investors across the globe are increasingly entering Bitcoin. Christopher Wood, global chief of equity strategy at Jeffries Financial, a private investment bank, has supposedly slashed his exposure in gold to purchase additional Bitcoin.
As per December 18 report published by Indian media outlet Business Standard, the well-known market analyst has reduced his investment in gold for the foremost time in many years. Wood, in a note to investors, wrote that his Bitcoin assignments represent 5% of portfolio:
“The 50 per cent weight in physical gold bullion in the portfolio will be reduced for the first time in several years by five percentage points with the money invested in Bitcoin. If there is a big drawdown in bitcoin from the current level, after the historic breakout above the $20,000 level, the intention will be to add to this position.”
As per the report, Wood intends to additionally boost exposure to cryptocurrency if there is a price reversal. Nevertheless, the analyst also backed the view of Goldman Sachs by staying bullish on the yellow metal also. Wood stated:
“This does not mean that GREED & fear is going to give up on gold. And the yellow metal should rally again if the Fed stays dovish in the face of the dramatic cyclical recovery that is coming on the other side of the pandemic, in line with GREED & fear’s base case.”
Interestingly, Bitcoin has recorded a fresh all-time hight of $23,820 earlier today. At the time of writing this article, Bitcoin was trading at $22, 969 as per data provided by Coingecko.com. On the contrary, gold prices declined Thursday, with spot gold and futures plummeting 0.3%. Gold has lost roughly 10% from the historical high of $2,076 recorded in August.