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Currie, Goldman Sachs Thinks Bitcoin Is Not a Threat To Gold

Gold Over Bitcoin
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EDITOR NOTE: Goldman Sachs calls Bitcoin the “retail” inflation hedge, likening it to copper (among all things), and stating that it's not a threat to gold. Note what they called it: not a speculation but a hedge. Sure. Why not? Anything that moves inversely to inflation and that’s non-correlated to the S&P 500 can be a hedge. Just be careful as to how you allot your positions. Remember: gold is driven by fundamentals, its volatility nowhere near that of Bitcoin which isn’t driven by clear fundamentals at all (at least not yet, or just hardly). So, if you crave a “volatile” hedge, then go for it. But that’s kind of ironic, if not contradictory, because isn’t the purpose of a hedge to “reduce” volatility, at least for most investors?

Jeff Currie, global head of commodities research at Goldman Sachs, revealed his outlook for bitcoin, gold, and copper on Thursday. Commenting on the recent surge in bitcoin’s price, he said on Bloomberg Markets that looking at its price chart, bitcoin looks “very similar” to copper. “What do they have in common?” he continued:

They are both risk-on growth proxies, and I would argue that bitcoin is the retail inflation hedge.

Goldman Sach’s strategists led by Currie also wrote in a note on Thursday that “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.”

The strategists primarily attributed the recent decline in gold’s price to a coronavirus vaccine-driven investment strategy that led investors to buy riskier assets, rather than abandoning gold on the basis of its diminishing value.

Currie emphasized that gold is a defensive asset and “there’s really no evidence” that BTC “stole demand from gold.” Goldman Sachs’ analysts wrote:

We do not see bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort … We do not see evidence that bitcoin’s rally is cannibalizing gold’s bull market and believe the two can coexist.

Some analysts, including those at JPMorgan Chase, disagree with Goldman Sachs, however. They believe that investors are moving money out of gold investments into bitcoin. Some companies have also scaled down their gold exposure to purchase bitcoin to hedge against fiat currency devaluation, including British asset manager Ruffer.

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