BY Neils Christensen
President Donald Trump’s escalating trade war is taking its toll on risk assets, and gold continues to shine as a safe-haven asset and an alternative global currency.
Not only is gold beating the S&P 500 as Trump levies significant tariffs on Mexico, Canada, and China, but it’s also outperforming Bitcoin, which saw a sharp drop over the weekend.
Bitcoin has been struggling since hitting new all-time highs above $100,000 per token last month. On Sunday, as equity markets were starting a new trading week, the leading cryptocurrency dropped to a low of $91,530 per token. Although Bitcoin has managed to bounce off its overnight lows, it remains in negative territory at $95,135 per token, down 2.6% on the day. Bitcoin is down 13% from its all-time highs seen just two weeks ago.
Meanwhile, gold prices experienced some modest selling pressure overnight as they tested support around $2,800 an ounce. However, prices have recovered ahead of the North American open. As of 8:45 a.m. ET, April gold futures were trading at $2,847.50 an ounce.
Many analysts expect gold prices to remain in a solid uptrend, even as they face increasing volatility due to strong gains in the U.S. dollar. In a note Monday, Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, said that gold should remain well supported as the “everything bubble” starts to deflate. While gold has managed to bounce off its lows, the S&P 500 remains in heavily negative territory, down 1.58% ahead of the open.
“Gold may be gaining momentum vs. the stock market and Bitcoin, with unfavorable macroeconomic implications. Up about 5% as of Jan. 31 since Bitcoin first closed above $100,000 on Dec. 6, the precious metal is beating both the crypto and the S&P 500,” McGlone said in his note.
McGlone added that gold is in a much better position than Bitcoin to attract new safe haven flows as sentiment in equity markets continues to sour.
“It could be a short-term spurt for the old-guard store of value, but four years of gold ETF outflows versus the biggest ETF launch in history for Bitcoin, strong competition from record-setting stocks, and high U.S. interest rates may suggest a pinnacle that the precious metal is sniffing out,” he said.
McGlone noted that Bitcoin could be facing a make-or-break moment as it underperforms gold, which could also have broader implications for global financial markets.
“A top prerequisite for continued appreciation of the highly speculative digital asset that’s been embraced by Trump might depend on the performance of the U.S. stock market. At 36x, the ounces of gold equal to a Bitcoin have stalled near the 2021 high,” he said. “Gold’s roughly 37% gain versus 27% for the S&P 500 year-over-year as of Jan. 31 may suggest that the metal is testing the limits of the great U.S. wealth-creation machine. Runaway U.S. government deficit spending buoys both gold and the stock market, but equities may have reached diminishing returns. Bitcoin/gold may be in a ‘must-go-up-or-else’ situation due to President Donald Trump’s endorsement and its implications for risk assets.”
By Neils Christensen
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