There Is No Substitute Between Gold and Bitcoin – Aberdeen Standard

   2019-05-28 22:05

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(Kitco News) – With bitcoin trading near its highest level in a year and testing resistance at $9,000 a token, the debate between cryptocurrencies and gold rages on, but one investment firm said it’s not fair to compare the two assets.



Many investors are looking at bitcoin as the new safe-haven asset of the 21 century as the price of the digital currency has tripled since mid-April. Meanwhile, the gold market has been lackluster, range bound between $1,250 an ounce and $1,300 an ounce. June gold futures last traded at $1,277.70 an ounce, down 0.46% on the day.

Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, told Kitco News in a recent interview that gold’s low volatility and steady rise over the years is what makes it an attractive long-term store of wealth.

On the other hand, bitcoin’s volatility, while attractive to speculative investors, does not make it an efficient currency or safe-haven asset. Maxwell Gold noted on average bitcoin is about 15 times more volatile than the U.S. dollar, 12 times more volatile than the euro, seven times more volatile than gold and three times more volatile than oil—the most unpredictable commodity in financial markets.

“Volatility is a function of either inefficiency in the marketplace or liquidity issues,” said Maxwell Gold. “Both factors are issues for potential investors. What happens when you have to liquidate your position? What price are you going to get.”

However, gold is a deep market with massive liquidity,” said Maxwell Gold.

“Comparing gold to bitcoin is literally comparing apples to oranges,” he said. “I just don’t think you can substitute one asset for another.”

Maxwell Gold added that investors should also consider what the digital marketplace will look like 10 or 20 years from now. Will bitcoin remains the top digital currency or will evolving technology herald a new asset, he said.

“The cryptocurrency market is still new and still doesn’t have much utility in financial markets, but I would bet that years from now central banks will still be holding gold as an important reserve asset,” Maxwell Gold said.

Gold added speculative interest continues to drive bitcoin prices, which is not sustainable in the long run. Although bitcoin prices have rallied significantly in the last few months, prices are still down roughly 50% from its 2017 all-time highs.

Looking at the gold market, Maxwell Gold said that although the precious metal has struggled to attract investor attention, he remains optimistic that prices will rise.

He added that growing market uncertainty should make gold an attractive safe-haven asset, particularly as the market expects the Federal Reserve to cut rates by the end of the year. The CME FedWatch Tool shows that markets are pricing in a more than 70% chance of a rate cut by December.

“Even if the Fed remains neutral, it’s still positive for the gold market as real rates will remain low,” Maxwell Gold said.

The firm remains modestly bullish on gold and sees prices pushing back above $1,300 an ounce by the end of the year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.


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