In a recent report, analysts at J.P. Morgan have warned that increasing geopolitical tensions and the upcoming U.S. presidential election could drive investors towards gold and bitcoin as safe-haven assets.
Debasement Trade Drives Investors to Gold and Bitcoin
The analysts, Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole, and Krutik P Mehta, referred to this trend as the “debasement trade,” driven by factors such as heightened geopolitical uncertainty, inflation concerns, government deficits, and waning confidence in fiat currencies.
Gold prices have seen a significant surge in recent months, approaching the $2,700 level on September 26. The analysts attributed this increase to a combination of factors, including a weaker dollar, lower real U.S. Treasury yields, and the re-emergence of the “debasement trade.”
Historical trends support this prediction. As noted in a CryptoQuant post, gold prices soared during the 2008 financial crisis as U.S. Treasury Bill yields declined. A similar pattern is now emerging, with gold prices rising alongside falling yields.
While bitcoin, often referred to as “digital gold,” is expected to follow this trend, CryptoQuant analyst J.A. Maartuun noted that gold is currently outperforming bitcoin. This discrepancy could be attributed to the fact that gold has already benefited from declining yields and expanding money supply, while bitcoin’s price has not yet fully reflected these factors.
