In a notable divergence in investment trends, leading gold-tracking exchange-traded funds (ETFs) have encountered substantial outflows totaling $2.39 billion since the beginning of the year.
This decline comes amidst a downward trajectory in the spot price of gold, marking a challenging period for traditional gold investments. Bloomberg intelligence analyst Eric Balchunas reported that the top 14 gold ETFs witnessed these significant outflows, with only a few exceptions experiencing minor inflows.
Bitcoin ETFs garner strong inflows
Contrary to the gold market, ETFs tracking the spot price of Bitcoin have enjoyed significant investor interest, with aggregate inflows reaching $3.89 billion in 2024. The emergence of ten approved spot Bitcoin ETFs has fueled this surge in investment, with record volumes recorded within this space.
Bitcoin’s allure appears to be drawing attention away from traditional gold investments, as evidenced by the substantial disparity in inflow trends between the two asset classes.
While some speculate about a mass migration of investors from gold ETFs to Bitcoin ETFs, analyst Eric Balchunas suggests that the shift may be attributed to “US equity FOMO” rather than a direct transition from gold to Bitcoin.
This sentiment challenges the notion of a direct substitution effect between the two assets and underscores the complexity of investor behavior in response to market dynamics.
Market performance comparison
The divergence in investor sentiment is further underscored by the disparate performance of gold and Bitcoin in 2024. Gold prices have experienced a 3.4% decline since the year’s onset, reaching a two-month low of $1,993 per ounce on February 14th.
In contrast, Bitcoin prices have surged by 23.5% over the same period, attaining a two-year high of $52,483 on the same date. This stark difference in performance reflects shifting preferences among investors seeking alternative stores of value.
Renowned figures within the financial industry have weighed in on the contrasting fortunes of gold and Bitcoin. Notably, portfolio manager “Bitcoin Munger” highlighted the alarming asset under management (AUM) decline across various gold ETFs, signaling a broader trend away from traditional safe-haven assets.
Meanwhile, Bitcoin pioneer Jameson Lopp drew attention to the divergence between the two ETFs, prompting reflections on the stance of prominent Bitcoin detractors such as Peter Schiff.
Analysis from industry observers
The World Gold Council attributed gold’s lackluster performance to global ETF outflows and a reduction in speculative positioning, further exacerbated by headwinds from long-term Treasuries and the strengthening US dollar.
Despite earlier predictions favoring gold’s outperformance over Bitcoin in 2024, the current market dynamics suggest a different reality, with Bitcoin emerging as the preferred investment avenue amidst economic uncertainty.
