Gold Price to ‘Suffer’ at Bitcoin’s Expense, Say JPMorgan Strategists

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In Brief
  • The gold price looks set to suffer at bitcoin's expense, according to JPMorgan strategists.

  • Inflows into crypto funds and outflows from gold suggest a shift in investor sentiment towards the emerging asset class.

  • JPMorgan is the latest of a string of major financial institutions turning bullish on BTC.

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Strategists at JPMorgan Chase & Co. believe that bitcoin will continue to eat into gold’s market over the coming years.

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Increased interest in cryptocurrency funds appears to be coming at the expense of the precious metal.

Investors Increasingly Choosing Bitcoin Over Gold

Recent gains in crypto prices appear to be driven by diversification away from gold. Strategists at JPMorgan Chase & Co. believe the trend could continue as interest in the emerging asset class grows.

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Having served as a form of money for thousands of years, gold is a well-established asset already. By contrast, institutional investors are only just waking up to digital money, ala crypto.

Cited by Bloomberg, JPMorgan strategists wrote that BTC adoption by institutions “has only just begun.” The investment bank calculated that family offices currently hold just 0.18% of their assets in crypto.

Meanwhile, gold ETFs account for 3.3% of family office allocations. If the trend from gold to bitcoin continues, there seems to be a lot of room for BTC to grow as the yellow metal presumably falls out of favor.

The bank noted that investors had committed more than $2 billion into the Grayscale Bitcoin Trust since October. By contrast, around $7 billion has left gold ETFs over the same period.

However, the strategists also noted that the cryptocurrency market might have exhausted its momentum in the short-term. Conversely, depressed gold prices look set to recover somewhat.

Digital Gold Narrative Continues to Pick Up Steam

This year has seen several influential financial institutions warm to Bitcoin as a legitimate part of a portfolio. As well as JPMorgan’s about-turn on BTC, Black Rock, Deutsche Bank, Goldman Sachs, and Citibank have all expressed varying degrees of interest in the digital currency.

Many of those recent converts believe that bitcoin, with its finite supply, represents a digital gold equivalent. The traditional asset’s scarcity is what makes gold appealing as a safe-haven hedge.

Such safe-haven assets traditionally do well in times of economic stress. The fiscal measures introduced in the wake of the coronavirus pandemic have rocked confidence in fiat currencies, encouraging investments in harder forms of money.

The macroeconomic context already appears to have been beneficial to both assets. Despite recent dips, gold and bitcoin are up more than 21% and 155%, respectively, year to date.

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A former professional gambler, Rick first found Bitcoin in 2013 whilst researching alternative payment methods to use at online casinos. After transitioning to writing full-time in 2016, he put a growing passion for Bitcoin to work for him. He has since written for a number of digital asset publications.

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