Gold versus Bitcoin: Investors weigh up the options when hedging their bets
Gold and Bitcoin have emerged as significant asset choices to preserve wealth in an era characterized by global economic volatility and shifting monetary frameworks.
Their histories diverge. Gold is a physical commodity prized as a durable safe haven for thousands of years; Bitcoin is a decentralized digital currency system introduced in 2009.
Both have been prominent in the news of late.
Gold surged past the U$3,000 per ounce milestone this month after rising more than 40 percent in the past year. Its rise has been fueled by fears of inflation and recession, and by central bank buying. Bullion tends to appeal to more conservative investors.
Bitcoin is limited to 21 million coins, with over 19 million circulating as of this month. The digital currency doubled in value after the 2024 US election, amid favorable comments about cryptocurrencies by then President-elect Donald Trump.
Bitcoin was trading at around US$85,000 in the third week of March, up from US$64,285 a year earlier. It tends to attract tech-savvy, risk-tolerant investors.
Gold offers stability but is costly to secure in physical form. Bitcoin, while more volatile, is easily transferable globally on digital infrastructure.
What do analysts say?
Michael Saylor, executive chairman of MicroStrategy and a prominent Bitcoin supporter, calls cryptocurrency "digital gold," highlighting its fixed supply and hedge against inflation.
With MicroStrategy owning over 400,000 bitcoins, Saylor forecasts a $45 million per coin valuation by 2045, driven by institutional adoption. He sees Bitcoin's independence from government control as a strategic advantage.
On the other side of the coin is Peter Schiff, a well-known economist and gold advocate. He rejects Bitcoin as a speculative bubble, pointing to its fall from 36.3 ounces of gold per coin in 2021 to 27.7 by 2025.
Schiff insists that gold's physicality makes it a dependable anchor as monetary systems weaken.
Central banks in China, Russia, the US, India and other countries ramped up their gold reserves in 2024, with China holding over 2,200 tonnes to support the yuan and stand as a hedge against dollar devaluation in purchasing-power terms.
Bitcoin has been given a boost by US approval of cryptocurrency ETFs in 2024 and El Salvador's authorizing digital currency as legal tender.
This month, Trump launched a Strategic Bitcoin Reserve with 200,000 seized coins worth billions of dollars – a move hailed by supporters as a visionary step to position the US as a crypto leader and as a counter to the dollar's erosion in value.
Critics, however, question the practice of tying national wealth to a speculative asset.
Republican US Senator Cynthia Lummis from Wyoming and crypto advocate has proposed buying one million bitcoins over five years to further solidify this shift.
A weakening US dollar underscores interest in both assets. Gold's neutrality aids diversification, while Bitcoin's borderless nature fits a decentralized vision.
China enforces customs regulations on gold movements – versus strict ownership caps – while banning Bitcoin trading since 2017 and mining since 2021 to control capital flows.
Speculation surrounds US gold reserves, estimated at 8,133 tonnes and potentially worth US$760 billion at a gold price of US$2,900 per ounce. The reserves are officially valued at the 1973 rate of US$42.20 an ounce.
Senator Lummis suggests revaluation could fund Bitcoin purchases without taxes, aligning with Trump's reserve strategy, though evidence of a broader shift to gold or digital currency is limited.
Gold and Bitcoin represent a dichotomy between tradition and innovative investing. Schiff praises gold's proven merit; Saylor envisions Bitcoin's transformative potential.
Central banks favor gold, yet Trump's Bitcoin reserve policy, seen as both a bold hedge against the dollar's decline and a risky bet on an untested asset, integrates cryptocurrency into national policy, amid revaluation speculation and China's distinct regulatory approach.
These roles are evolving in a shifting financial landscape.
(The author has more than 30 years of experience in China as a financial consultant and geopolitical analyst. He holds an Executive MBA from Fudan University in Shanghai.)
