Bitcoin and gold have emerged as preferred safe-haven assets amid increasing geopolitical tensions. Analysts at J.P. Morgan indicate that these factors, combined with the upcoming November presidential election, could drive investors towards what they term the 'debasement trade.'
According to J.P. Morgan Global Markets Strategy analysts, including Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole, and Krutik P Mehta, recent geopolitical events have initially impacted gold prices less significantly. However, they report a sharp rise in gold values, approaching the $2,700 mark as of September 26.
This increase in gold prices correlates with a 4-5% decline in the dollar and a substantial drop in real U.S. Treasury yields by 50-80 basis points. Analysts suggest that the appreciation of gold has surpassed expectations based on these factors, indicating a resurgence of the 'debasement trade.'
The debasement trade is fueled by a combination of escalating geopolitical uncertainty since 2022, ongoing inflation worries, significant government deficits in major economies, and declining confidence in fiat currencies, especially in emerging markets.
A recent CryptoQuant analysis echoed these views, noting historical trends where lower U.S. Treasury yields have historically resulted in rising gold prices. For instance, in 2008, a decrease in Treasury Bill yields saw gold prices leap from $590 to a peak of $1,900 per ounce by 2011. A similar trend is currently observed with gold climbing from $2,000 to almost $2,700.
Despite these developments, CryptoQuant analyst J.A. Maartuun highlighted that while gold is benefiting from the current economic circumstances, bitcoin has not yet followed suit, leading to a current negative correlation between bitcoin and gold.
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