Goldman: Bitcoin and Gold 'Can Coexist'

There has been a sharp divergence in the fortunes of gold and bitcoin over the past few weeks asa wide range of strategists and talking headsnote that “there also appears to be growing demand for using bitcoin where gold was previously used, to hedge dollar risk, inflation and other things.”

And this led to a sharp collapse in the correlation between the two assets …
But although JPMorgan promoted the idea of ​​structuralgold-bitcoin flow, Goldman Sachs in its latest note states that “Bitcoin and gold can coexist.” As Goldman's Jeff Currie writes, gold's recent underperformance against real rates and the dollar has some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice.
Although there is some substitution, we are notWe view Bitcoin's growing popularity as an existential threat to gold's status as the currency of last resort. Both institutional investors and wealthy individuals avoid cryptocurrencies due to their inherent transparency issues, while speculative retail investment is driving Bitcoin to move as an overly risky asset. In fact, starting at the depth of the first lockdown, Bitcoin's growth has been correlated with the growth of copper, a key indicator of global growth.
In our opinion, bitcoin is retailreflation, while gold is a defensive asset with long-term preservation of real capital. In addition, the recent gold sell-off was more closely related to the vaccine-based risk rotation rather than the abandonment of gold as a hedge against depreciation.
Historically, such aggressive rotation lastsnot for long as investors quickly rebalance their portfolios. As such, we expect gold ETFs to recover in early 2021. With rising inflationary expectations, a weakening dollar and an overvaluation of some risky assets, demand for safe inflation hedges should be supported next year, continuing to push gold towards our target of $ 2,300 per troy ounce.
Overall, we see no evidence that the Bitcoin rally cannibalize the bull market for gold, and we believe they can coexist.

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