Is it Gold or Bitcoin, or both? The interplay between traditional assets and emerging digital currencies has become a subject of keen interest. Recently, as central banks reevaluate their monetary policies and reconsider the prospect of interest rate cuts, two distinct assets have found themselves under scrutiny – gold, a longstanding symbol of wealth and stability, and Bitcoin, a decentralized digital currency challenging conventional notions of value.
Gold and Bitcoin – Which is the true hedge against inflation?
Gold (XAU/USD) prices closed lower last week, marking the second decrease in three weeks, affected by cautious words from Federal Reserve policymakers. Federal Reserve Governor Christopher Waller’s plea for a “methodical and careful” approach to rate decreases matched that of Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic.
Both emphasized the need for further inflation data before making rate adjustments, implying probable delays in rate cuts and influencing investor mood.
The yellow metal began the week bearishly, dragged down by a strong revival of demand for the US dollar, as well as an equally robust increase in US yields across various periods.
Chinese data releases throughout the first half of the week disappointed market participants once more, reaffirming the belief that an economic rebound in that nation remained a pipe dream for the time being.
That scenario in China pushed both Gold and the risk-linked galaxy to continue their weekly declines at a time when the US Dollar’s bullish momentum was strong, and the USD Index (DXY) was rising to new yearly highs around 103.70 (January 17).
Gold forecast this week
The unexpected increase in inflation figures in the United Kingdom has bolstered the case for maintaining a tight posture for a longer period of time than was initially anticipated. Additionally, brisk inflation in the United Kingdom delayed market speculation regarding a potential rate cut by the “Old Lady” in H1.
Christine Lagarde, president of the European Central Bank (ECB), became a member of the society subsequent to expressing the opinion that the ECB could potentially commence a reduction in its policy rates during the summer. This viewpoint was further supported by other policymakers over the course of the week.
A review of the upcoming events for the following week suggests that gold prices ought to maintain their cautious posture in light of the interest rate decisions made by the Bank of Japan, the Bank of Canada, and the European Central Bank. It is anticipated that each of them will maintain their interest rates unchanged.
The release of advanced Manufacturing and Services PMIs on both sides of the Atlantic, an additional estimate of the US GDP Growth Rate for the fourth quarter, and US inflation figures for the month of December, this time measured by the PCE, are additional potential catalysts for the non-yielding metal.
The escalation of the Israel-Hamas conflict, the crisis in the Red Sea, and the participation of significant players as this scenario continues to proliferate are geopolitical factors that contribute to increased demand for the yellow metal.
Bitcoin forecast this week
As of this moment, the value of Bitcoin (BTC) stands at $41,777.58. This represents a 0.1% decrease compared to the last hour and a 0.3% growth compared to yesterday. BTC is currently worth 2.3% less than it did seven days ago. The total volume of Bitcoin traded over the last twenty-four hours was $8,327,138,196.
Although the temporary decline in volatility may cause concern, the onset of speculative trading and the Chinese New Year in February may help to allay these apprehensions.
CoinGlass data indicates that the short-term correction in Bitcoin prompted marketwide liquidations in excess of $200 million, notwithstanding the forthcoming events.
Despite the recent BTC transfers to the Coinbase exchange, which may have contributed to a portion of Thursday’s decline, exchange supply continues to decline. At present, the aggregate supply on centralised platforms stands at 1.06 million, reflecting an 18% decline since the onset of 2023.
The decrease in supply maintained on exchanges indicates that investors are optimistic about the future of Bitcoin and have no immediate plans to divest their holdings. This is a favorable outlook on the whole, which is typical during a bull run.
