The Diminishing Shine of Gold
Gold has long been considered a safe haven in the world of investing, that shiny metal people hoard during economic uncertainty, like squirrels with acorns. However, after a more than 11% drop over the last six months, even the staunchest gold enthusiasts are starting to wonder if it’s losing its luster. Currently trading above $1,700, gold has taken a beating since hitting an all-time high of $2,100 in the summer of 2020.
Inflation Hedge or Just a Myth?
Russ Koesterich, a portfolio manager at BlackRock, recently expressed skepticism about gold’s status as a hedge against inflation. He noted,
“Gold’s ability to hedge against inflation has been somewhat exaggerated. While it is a reasonable store of value over the very long-term — think centuries — it is less reliable across most investment horizons.”
This suggests that if you’re looking to gold to save you from soaring prices, you might be better off stashing those pennies under your mattress instead.
The Pandemic’s Unruly Aftermath
The investment landscape today is shaped by the ongoing fallout from the pandemic and massive government stimulus packages designed to prop up economies around the world. The fears surrounding inflation are palpable, but it seems gold isn’t responding in the expected way. No wonder some investors are starting to look beyond the yellow metal.
A Shift to the Digital Gold
If gold bears the weight of decreasing desirability, the digital age continues to flaunt its glimmering alternative: Bitcoin. While gold is struggling, Bitcoin (BTC) has seen a stunning 90% increase in value year-to-date. Some analysts suggest that this shift is what’s driving significant outflows from gold ETFs. It seems like Bitcoin is stealing gold’s thunder and relegating it to the dusty shelf of memory.
The Great Gold vs. Bitcoin Debate
In November 2020, Chinese banks began halting new precious metal trading accounts, indicating perhaps an underlying concern about gold’s volatility. In stark contrast, Bitcoin has been steadily gaining ground. Mike McGlone, a senior Bloomberg strategist, noted that BTC is “pushing aside” gold as a preferred store of value. So, if you were wondering what’s the new gold, it might just be that virtual coin laden with promise (and a few gagging fluctuations).
Conclusion: Time for a Rethink
If you’ve been using gold as your go-to defense against inflation, now might be the time to reassess. With top investment managers like Koesterich suggesting a lack of reliability and the meteoric rise of Bitcoin, the narrative might need a serious upgrade. It seems like the old adage of relying solely on gold is shifting into the digital domain. Who knows? Perhaps your next investment strategy will have you typing in a wallet address instead of depositing gold coins. The times they are a-changin’!
