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Gold vs Bitcoin: Recession Concerns Spark Renewed Investment Debate

2 mins
Updated by Ryan James
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In Brief

  • Gold's recent rally reignited debates about how it could be useful amid recent weakening economic conditions in the United States.
  • According to the World Gold Council, the metal will benefit from rising central bank demand and worsening geopolitical conditions.
  • Bitcoin's usefulness will be tied to whether ETFs can keep the asset's price above $30,000 in Q1, investment firm VanEck reported.
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Whenever there’s talk of a recession, comparisons between gold and Bitcoin inevitably surface, especially in light of possible Bitcoin ETF approvals. While most mainstream media outlets speak of a soft landing, some institutions and experts are adamant that the picture is not so rosy.

Investment manager VanEck predicts the US economy will enter a recession in the first quarter, long before many pundits believe the Federal Reserve will start cutting rates. A broader slowdown in commodities and employment, struggling retail shares, and a sharper inverted yield curve all signal an imminent slowdown in growth.

Macro Conditions Will Improve Gold Price

According to Joseph Cavatoni of the World Gold Council, gold will flourish amid market risk and uncertainty. More and more central banks are diversifying away from the US dollar and into gold, which may increase demand soon. Geopolitics are also playing an increasing role.

“Investors are paying more attention to gold because they don’t want to be blindsided in 2024,” he said.

XAU/USD Price Decline
XAU/USD Price Decline | Source: TradingView

While gold’s technicals sagged recently, Cavatoni expects the asset’s performance to be shaped more by macroeconomics in the coming months. Last week, the asset touched an all-time high of $2,150 per ounce, but sellers pushed it back down.

If it stabilizes, it could breach the $1,990 and $2,010 levels, but if more selling happens, the price could fall below the 200-day simple moving average of $1,950 and drop to $1,930.

Bitcoin May Counteract Recession Effects

VanEck predicts that approvals of exchange-traded funds will support Bitcoin’s price going into 2024. Absent notable volatility, the asset is unlikely to drop below $30,000 in Q1 and could form a vital part of investment portfolios.

Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach

The financial firm predicts $2.4 billion in inflows in a quarter and the asset to steal market share from gold even as US voters become aware of currency devaluation through money printing. ETFs may see inflows of $40.4 billion in the first two years of their listings.

So, in short, Bitcoin ETF approvals may counteract Fed money printing if a recession materializes. Gold may benefit from rate cuts if the US economy encounters a hard landing and central banks choose to hold the asset over the US dollar, Cavatoni said.

Today is the first day of the US Federal Reserve Meeting that market participants are anxiously awaiting. The Fed will decide how to amend interest rates to bring inflation down to 2%. 

Read more: How to Buy Bitcoin Safely

Do you have something to say about the battle of Gold vs Bitcoin in a recession, the role of ETFs in keeping the Bitcoin price high or anything else? Please write to us or join the discussion on our Telegram channel. You can also catch us on TikTokFacebook, or X (Twitter).

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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