Inflation concerns have led to more volatility in the stock and bond markets of late. That should be good news for gold, a tangible asset with a limited supply that often does well in times of inflation. Central banks can always print more money. Miners can’t just magically create more gold.
But gold has recently lost some of its luster thanks to a new financial kid in town: bitcoin. Gold prices are down about 9% this year and are trading nearly 15% below the all-time high of more than $2,000 an ounce set last summer.
Meanwhile, bitcoin has soared nearly 70% and is currently hovering just below $50,000 per coin — not far from the record high it reached last month.
Still, fans of gold think the yellow metal is due for a rebound — even if bitcoin continues to march higher as well.
The tried and true inflation hedge
Gold is a classic fear trade. Prices rallied last year on worries about coronavirus lockdowns crippling the global economy. But gold also does well when investors are worried about inflation — as they are now.
Plus, the price volatility of bitcoin may make it less attractive than gold to many big institutions looking to protect their cash, despite recent decisions by the likes of Tesla ( ) and MicroStrategy ( ) to hold bitcoin on their balance sheets.