The global financial landscape has been rattled by the unexpected outcome of the recent US elections. With President-elect Donald Trump’s victory, markets are adjusting to the reality of a “Red Sweep.” This surprising turn of events has affected various asset classes, including gold and Bitcoin. While Bitcoin prices soar to record highs, gold is facing a sudden slump after an impressive 2024 performance. The question arises: which is the better option for your investment portfolio — Bitcoin or gold?
Bitcoin’s Surge: What’s Driving the Price?
Bitcoin has experienced a remarkable surge following the US elections. The cryptocurrency, which once faced scepticism, has gained favour under Trump’s administration. President-elect Trump, who once criticized Bitcoin, has recently expressed support for digital currencies, calling them a hedge against inflation and a tool for financial innovation. He has promised to introduce more pro-Bitcoin policies, including a favourable regulatory environment.
The global demand for Bitcoin is increasing, driven by Trump’s shift towards embracing cryptocurrency. Investors are betting on its future as a mainstream asset. Bitcoin’s supply is limited to 21 million coins, and with millions already lost or inaccessible, the remaining supply is even more constrained. This scarcity, combined with increasing demand, has pushed the price to new heights.
Bitcoin’s recent price action is primarily driven by basic economic principles of supply and demand. The surge reflects strong demand, with Bitcoin potentially heading towards the psychological milestone of US$100,000. The digital currency’s price is currently enjoying a technical bullish trend, bolstered by high demand.
Gold’s Struggles: What’s Behind the Fall?
Gold, traditionally viewed as a safe haven asset, has faced a challenging period since Trump’s victory. Despite being one of the best-performing assets in 2024, gold prices have taken a hit post-election. This decline can be attributed to several factors, including expectations of stronger US economic growth under Trump’s policies. A stronger economy typically reduces the demand for gold as a hedge against uncertainty.
Moreover, Trump’s victory has raised expectations of inflationary pressures, which could lead to higher US bond yields. As bond yields rise, the opportunity cost of holding gold increases. Unlike Bitcoin, gold does not offer yield or interest, and investors often find it expensive to store and insure physical gold holdings. As interest rates rise, investors may find more attractive returns in risk-free assets like US bonds, thus diminishing gold’s appeal.
Gold Price Outlook: Short-Term Struggles, Long-Term Resilience
Gold is currently trading at USD 2,628 per ounce, up by 0.42% on November 12, 2024. The day’s high reached USD 2,633.40, while the low touched USD 2,625.10. Despite this recent drop, gold has delivered a 1-year return of 34.78%, outperforming many other asset classes over the last 12 months.
However, the short-term outlook for gold is uncertain. The price has fallen below key technical levels, which suggests that the short-term trend is under pressure. Yet, gold still remains in a strong long-term uptrend, and any corrections may be seen as buying opportunities. As global inflationary pressures continue and central banks print more money, gold could benefit in the longer run.
Bitcoin vs Gold: Which is the Better Investment?
Both gold and Bitcoin have their strengths and weaknesses, but they cater to different types of investors. Gold remains a reliable hedge against inflation and currency debasement. Its historical role as a store of value, especially during times of economic uncertainty, is well-established. Gold has weathered many financial storms and is considered a safe haven in times of market turmoil.
On the other hand, Bitcoin offers a new frontier in digital assets. Its appeal lies in its decentralised nature and the potential for high returns driven by scarcity and growing adoption. Bitcoin’s supply is fixed, and with increasing demand, its value is likely to appreciate over time. However, Bitcoin is also highly volatile, with significant price fluctuations. It is not without risk, and its long-term stability remains uncertain.
How to Invest in Bitcoin and Gold?
For Australian investors looking to gain exposure to Bitcoin and gold, there are several options available. For gold, exchange-traded funds (ETFs) provide a convenient way to invest in physical gold without the hassle of storage and insurance. Some of the popular gold ETFs listed on the ASX include BetaShares Gold Bullion Hedged ETF (ASX: QAU), iShares Physical Gold ETF (ASX: GLDN), and Perth Mint Gold (ASX: PMGOLD).
For Bitcoin, investors can access ETFs that track the performance of the cryptocurrency. The DigitalX Bitcoin ETF (ASX: BTXX) and VanEck Bitcoin ETF (ASX: VBTC) offer Australian investors the opportunity to invest in Bitcoin without directly holding the digital asset. These ETFs are physically backed by Bitcoin, allowing investors to benefit from Bitcoin’s price movements while avoiding the complexities of directly managing a cryptocurrency wallet.
Conclusion: A Place for Both in Your Portfolio?
Gold and Bitcoin both have roles to play in a diversified investment portfolio. Gold continues to be a reliable asset for wealth preservation, particularly in uncertain economic times. Bitcoin, with its potential for high returns and increasing adoption, presents a more speculative investment that could complement traditional assets like gold.
Investors who seek stability may favour gold, while those willing to take on more risk for the chance of greater returns may opt for Bitcoin. A balanced portfolio may benefit from holding both assets, as they each offer unique advantages. Ultimately, the decision comes down to an investor’s risk tolerance, investment goals, and market outlook.
As the global financial landscape continues to evolve under the Trump administration, both Bitcoin and gold are likely to remain relevant assets for investors seeking to hedge against uncertainty and inflation. Whether you choose gold or Bitcoin — or both — now is an exciting time to evaluate these assets for your portfolio.