- Gold outpaces Bitcoin ETFs and stocks amid geopolitical risks.
- So, should investors top up portfolios with gold or Bitcoin?
Gold has been a dark horse in 2024.
While traders have been focused on stock markets like the S&P 500 and spot Bitcoin exchange-traded funds like BlackRock’s IBIT, gold’s returns just surpassed them both.
At $2,660 per ounce, gold has recorded a 29% gain so far this year — around 5% higher than IBIT, which has delivered a 24% gain since its January 11 inception.
By comparison, those investing in the S&P 500 have fared slightly worse, with returns just below 20% so far this year.
“Gold has been climbing higher tortoise style,” said Bloomberg Intelligence analyst Eric Balchunas.
The precious metal took another leap this week amid rising tensions between Iran and Israel while Bitcoin dropped.
Geoff Kendrick, global head of digital assets research at Standard Chartered, explained that while gold acts as a hedge against geopolitical risks, Bitcoin is more suited for protecting against issues within traditional finance, such as bank failures or de-dollarisation.
Will it last?
While gold has surged due to geopolitical tensions, history suggests its outperformance may not last.
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In the US-Iran escalation of 2020, gold initially outpaced other assets, but Bitcoin rebounded more strongly in the months that followed.
This has been a consistent pattern in recent years, according to JAN3, the developer behind the Aquabitcoin digital wallet.
Bitcoin’s ability to bounce back more sharply than gold has been seen during major events like the COVID-19 pandemic, the 2020 US election, and Russia’s invasion of Ukraine.
It usually takes about 60 days for Bitcoin to recover after massive geopolitical events, according to a recent report by asset management giant BlackRock.
Bitcoin or gold?
So should investors invest in gold or Bitcoin? Matt Hougan, chief investment officer at asset manager Bitwise, tackled that question in a blog earlier this week.
To him, it is a question of having more return or less risk. Looking at estimates provided by Bitwise, he compared traditional stocks and bonds portfolios that had up to 5% in either Bitcoin or gold.
The simulation was based on data from January 2014 to September 26, 2024.
Portfolios with 5% Bitcoin would have seen a yield of over 208% on the investment, while a similar gold allocation would’ve yielded just over a 100% return on the investment.
For Hougan, the answer to which of these two assets to invest in was simple: “Bitcoin.”
Crypto market movers
- Bitcoin gained 2.3% over the past 24 hours to about $61,800.
- Ethereum surged 1.7% over the same period to $2,392.
What we’re reading
Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.
### Additional Insight:
#### The Interplay Between Geopolitical Events and Asset Performance
Geopolitical events like the US-Iran escalation of 2020 have historically influenced the performance of assets like gold and Bitcoin, showcasing how investor sentiment can lead to fluctuations in the market. Understanding how different assets react to geopolitical uncertainties can help investors make informed decisions about portfolio diversification.
#### Long-term Trends in Asset Performance
Analyzing the long-term trends in asset performance, especially during geopolitical crises, can provide valuable insights into the resilience and growth potential of assets like Bitcoin and gold. By studying past patterns, investors can better anticipate market movements and tailor their investment strategies accordingly.
#### Risk Management and Investment Allocation
The comparison between Bitcoin and gold in terms of returns and risk highlights the importance of risk management in portfolio allocation. Investors must strike a balance between potential returns and risk exposure when deciding on the allocation of assets like Bitcoin and gold, aligning their investment choices with their financial goals and risk tolerance.
