The price of gold, an asset regarded as a safe haven, went through unusual enhanced volatility as it dipped by roughly 5% in a matter of hours. Despite bouncing off almost immediately, the precious metal is still about 9% down since the start of the year.
Naturally, this has raised speculations among the cryptocurrency community whether gold’s status as a hedge is up for grabs, as the so-called (by some) digital gold – namely bitcoin – continues to ride high.
Gold Dipped Hard
The yellow metal, a favorite safe haven investment tool for many, especially in times of economic uncertainty, has gone through several somewhat untypical market cycles since the start of the COVID-19 pandemic.
It was considered expected to a large extent when its price against the dollar started to increase as the latter was depreciating following the massive money printing. As such, gold went to an all-time high last year of nearly $2,100/oz.
However, it reversed its trajectory at that point and started gradually losing value as the world economy began its slow recovery.
The economic situation, though, still far from what it was before the pandemic, caused another brief spike in 2021 when the metal pushed above $1,900. This was relatively short-lived as gold dropped again to around $1,800, where it stood for a while.
All changed last week. Upon promising news from the US indicating that job growth has actually accelerated in July, the yellow metal fell by more than 2% in a day. The futures market on Sunday evening intensified the situation, and gold tumbled to around $1,685 – the lowest point since late March. Thus, its price was down by about 8% in a few trading days.
Crypto Community Reacts
As many consider bitcoin to be the digital version of gold, the news that the metal, known for its lack of volatility compared to the crypto market, has gone through a steep correction garnered the attention of the community. As such, mocking comments started frequently emerging from almost all directions.
From suggesting that gold has gone through a 51% attack to bashing Peter Schiff – the popular yellow metal supporter who uses every opportunity to go after BTC.
Peter Brandt, the prominent trader, offered his explanation of what had happened to the price of the precious metal. He noted that this substantial drop had “all the fingerprints of a bank/brokerage house conducting forced liquidation upon a huge leverage speculator.”
I’ve seen similar price action to $GC_F $SI_F many times over the years. This has all the finger prints of a bank/brokerage house conducting forced liquidation upon a huge leverage speculator. pic.twitter.com/MXcjwjyTsT
— Peter Brandt (@PeterLBrandt) August 9, 2021
Bitcoin Vs. Gold
As mentioned above, the primary cryptocurrency is frequently compared to the precious metal due to several identical features, including scarcity. As of recently, even community outsiders have outlined the similarities between the two, with some even claiming that bitcoin is the better version of gold as it’s easier to transfer and store.
Both’s recent price developments also suggest that BTC is performing better, even though gold reacted positively after the drop today and has reclaimed some ground to about $1,750 as of writing these lines. Nevertheless, it’s still about 9% down since the start of the year.
At the same time, bitcoin has been on a roll in the past few weeks after the mid-May correction. The cryptocurrency added about $15,000 of value since late July and reached a multi-month high of above $45,000 yesterday.
Despite still being a long way from the ATH reached in April, bitcoin is roughly 50% up in 2021. Moreover, it has increased by about 1,000% since the March 2020 crash when it dipped below $4,000.
Gold is also up in the same timeframe, but its gains are significantly more modest – 20%. Consequently, the community used this opportunity to highlight BTC as the more adequate alternative to the precious metal, especially in times of such economic uncertainty.
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