Source: Reuters
Authors: Deep Vakil and Josie Kao
Article: Original article
Publication date: Monday, December 12, 2022
Goldman Sachs expects that gold will surpass the highly volatile bitcoin in the long run.
Gold is less affected by tough financial conditions, therefore, it’s “more useful for portfolio diversification”, especially since gold has non-speculative uses, while bitcoin still has only the speculative ones.
Goldman’s analysis demonstrated that while traders use gold to protect against inflation and depreciate the dollar, bitcoin is more like a “risk-on high-growth tech company stock”.
Bitcoin's value proposition, which the bank called “a solution in search of a problem”, comes from its future possible uses, thereby making it a more unstable and speculative asset than the precious metal.
Despite the fact that investors are ready to learn more about the decentralized currency, and this interest has contributed to bitcoin’s implementation, the bank predicts financial conditions to become tougher.
Goldman also noted, referring to the fall of the FTX exchange and the 3AC hedge fund, that bitcoin’s high volatility on the decline was intensified by systemic fears, as some significant crypto market players declared bankruptcy.
While net speculative positions in both assets dropped rapidly over the previous year, gold increased slightly year-on-year, and bitcoin plummeted by 75%.
The bank’s report stated that lower liquidity has to have less impact on gold, which is mostly affected by real demand factors, such as jewelry purchased in Asia, as well as replenishment of central bank reserves, investments in safe assets and industrial applications of gold.
In addition, gold may profit from structurally higher macroeconomic volatility and demand to diversify equity investments.
Forecast: gold’s growth
This content is for informational purposes only and is not intended to be investing advice.
