Updated: November 8, 2024
Key Takeaways
Central banks and institutions are significantly increasing gold buying as the economic outlook worsens.
The declining US Dollar Index has made gold more attractive to foreign investors, boosting demand.
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Bitcoin is aiming for a new all-time high as gold reaches its own record today, up 28% in 2024 and on track for its best year since 1979. While the US Federal Reserve continues to push for a “soft landing,” gold’s surge may be signaling a different outlook for the economy.
Following the Fed’s recent interest rate cut of 0.5% on Sept. 18, gold surged to a record $2,648 per ounce today, driven by the weakening US dollar and rising global geopolitical tensions.
As the US Dollar Index ($DXY) weakens and rate cuts take hold, the tumbling dollar has made gold more attractive to foreign investors. These conditions mirror those of the 2008 Financial Crisis, with gold surging as a safe haven amid growing economic uncertainty.
Gold’s climb reflects investor concerns, with many seeking safe havens amid growing economic uncertainty. With the US government’s spending at 43% of GDP—matching levels seen during the 2008 crisis—gold has become a hedge against inflation and instability.
The geopolitical landscape, with ongoing conflicts in Ukraine, Israel, and the upcoming US presidential election, has further fueled demand for gold. Central banks, notably, have tripled their gold purchases since the start of the Ukraine war, as noted in a Goldman Sachs report predicting that gold could hit $2,700 by early 2025.
Meanwhile, Bitcoin, often dubbed “digital gold,” has also experienced a significant rally, rising 6% since the Fed’s rate decision and 7% in September alone—historically Bitcoin’s worst-performing month.
Crypto analysts predict that Bitcoin could follow gold’s lead, with some forecasting a potential all-time high for Bitcoin before the end of 2024, positioning both assets as key inflation hedges in uncertain times.
This rally in both gold and Bitcoin is occurring at a time when Treasury Secretary Janet Yellen and Fed Chair Jerome Powell continue to express confidence in achieving a “soft landing.” Gold’s meteoric rise, alongside Bitcoin’s surge, reflects growing skepticism in the market about the Fed’s ability to stabilize the economy, signaling that this is far from a “soft landing.”
The combination of economic instability, a weakened currency, and expansive government spending suggests a long road ahead for the US economy. Investors are increasingly turning to gold and Bitcoin as safe havens amid concerns that the Fed’s actions may not be enough to steer the country out of turbulent waters.
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