Gold

Analysts from the global investment bank JP Morgan Chase highlighted the increasing impact of 'devaluation trades' on boosting gold and bitcoin prices. The rise in gold is related to inflation, geopolitical instability, and weakening confidence in legal tender. In the midst of global economic uncertainty, institutions and retail investors alike see gold and bitcoin as safe havens, with future trends depending on geopolitical events and fiscal policies.

Jp Morgan Chase discusses how 'depreciating trade' drives the returns of gold and bitcoin.

Under the leadership of global strategist Nikolaos Panigirtzoglou at Jp Morgan Chase, analysts emphasized how 'depreciating trade' drives the returns of gold and bitcoin. They pointed out that the surge in gold has exceeded explanations based solely on the movement of the US dollar and actual bond yields. Instead, they attribute the growth to a range of factors, including geopolitical uncertainties, inflation concerns, and declining confidence in fiat currencies.

They explain: ''Depreciating trade' is a term that reflects factors driving gold demand. In our client discussions, these factors include higher structural geopolitical uncertainties since 2022, sustained high uncertainty in the long-term inflation background, concerns about 'debt depreciation' caused by continued high government deficits in major economies, weakened confidence in fiat currencies in some emerging markets, and a wider diversification away from the dollar.

Analysts also emphasize that gold prices are around $2,700 per ounce, and bitcoin prices are close to 0.06 million dollars, offering them new currencies. According to data from the International Monetary Fund (IMF), they point out that the share of the dollar in global currency reserves is declining, with the dollar now accounting for only 57% of forex reserves. Despite China pausing gold purchases since April, Jp Morgan Chase states:

Without a doubt, the speed of central bank purchases is a key measure of the future trajectory of gold prices.

Jp Morgan Chase analysts also examined the behavior of institutional investors, stating:

For us, this suggests that speculative institutional investors such as hedge funds may view gold and bitcoin as similar assets, both benefiting from so-called 'depreciating trades', rather than ethereum.

Furthermore, they observe that following the inflow of bitcoin exchange traded funds (ETFs) since August, retail investors seem to have similar views on gold and bitcoin. According to Jp Morgan Chase, a potential victory by Donald Trump in 2024 may further support 'depreciating trade' by intensifying geopolitical tensions and stimulating expansionary fiscal policies. Analysts state: 'This is because in recent months, investors have been preoccupied with recession trades.'