Gold and Bitcoin prices have been moving in opposite directions since Donald Trump’s election win on Nov. 5. Gold prices have dropped by 4.7%, while Bitcoin has surged by 29%.
Market experts believe that this divergence is due to contrasting reactions to the Republican victory. Investors see it as negative for gold but positive for Bitcoin and cryptocurrencies.
However, there are risks involved in taking a short position on gold and going long on Bitcoin, as pointed out by Will Denyer, Chief US economist at Gavekal Research.
The election outcome has raised expectations of a more pro-business government, which could lead to tax cuts, deficit expansion, tariff hikes, and deregulation. This scenario may result in a tighter monetary policy and a stronger dollar, making gold less appealing as an inflation hedge.
On the other hand, Bitcoin’s post-election trajectory looks promising due to a potentially friendlier regulatory environment and talks of creating a “strategic Bitcoin reserve.”
Former President Trump’s support for crypto, along with the election of blockchain advocate Bernie Moreno to the Senate, signal positive developments for the cryptocurrency sector.
Denyer notes that the expectation of a more crypto-friendly environment in the White House, Congress, and SEC has led to increased demand for cryptocurrencies, as seen in heavy flows into bitcoin ETFs after the election.
While the concept of a strategic Bitcoin reserve is intriguing, Denyer questions its practicality compared to other measures the government could take to address crises.
In conclusion, the future trajectories of gold and Bitcoin will depend on upcoming policy shifts and regulatory changes in the financial markets.