As investors worldwide struggle with inflation, economic uncertainty and a shaky dollar, gold is rocketing to unprecedented heights. In one week, the total value of gold grew by more than $2,300 billion, more than the entire market value of Bitcoin (BTC). What drives this historic rally?
Total value of gold increases by 2.3 trillion dollars
The gold price today reached a new record high of $ 4,260 per ounce (about 31 grams).
The total market value of the precious metal has increased by an astonishing $2.3 trillion in just one week. That’s more than Bitcoin’s entire market cap, which currently hovers around $2.2 billion.
This remarkable increase shows how powerful gold currently is as an investment instrument. Since the beginning of 2023, the gold price has doubled and this year alone the precious metal rose by more than 63 percent. For comparison, BTC is up 18.28 percent this year.
Gold rush among central banks
An important driver behind the gold rally is the buying urge of central banks. Globally, they have expanded their gold reserves to more than 4 trillion euros, an increase of 37 percent compared to last year. Economist Mohamed El-Erian points out that gold now accounts for a larger share of reserves than US government bonds, for the first time since 1996.
The build-up of gold reserves is the result of increasing distrust of the US dollar and the enormous debts worldwide.
Consumers are also stocking up on gold en masse. In Australia, people recently stood in line for sixty meters to obtain physical gold.
No one knows for sure when the advance will end. Bank of America has at least increased its price target for gold to $5,000 per ounce, analysts at The Kobeissi Letter said. According to the bank, the increasing risk of stagflation, a rare combination of high inflation and stagnant economic growth, is the main driver.
A Harbinger for Bitcoin?
According to The Kobeissi Letter, gold, silver and Bitcoin are now among the ten largest asset classes worldwide. All three are considered safe havens in uncertain times, although Bitcoin still has to prove itself in that regard.
BTC remains volatile for the time being. Last Monday, the digital currency reached a new record of more than 126,000 dollars, but the price is now almost 13 percent lower.
Yet the trend towards gold could simply be a harbinger. Gold, as a traditional safe haven, logically receives attention first. But if the gold price continues to rise, there is a good chance that investors will also turn to the relatively cheap Bitcoin.
According to analyst Michaël van de Poppe, a recurrence may now occur. He compares the current gold rally to Bitcoin’s peak in 2017 or 2021, and sees the same ‘retail behavior’ returning.
“People don’t believe it can correct until it does. Crypto is about to follow gold, and on a scale far greater than what gold is showing now.”
Source: https://newsbit.nl/nieuw-record-voor-goud-stijgt-in-een-week-meer-dan-bitcoins-totale-waarde/
