Gold has demonstrated exceptional performance this year, distinguishing itself among major assets, including bitcoin, which has shown more modest gains. As of recent data, gold’s price has surged by 44%, reaching a peak of $3,784 per ounce. In comparison, silver has increased by an impressive 53%, currently valued at $44.32 per troy ounce. Platinum has also seen remarkable growth, with a 60% rise to $1,452, while palladium has experienced a 33% increase, bringing its price to $1,207.
Despite bitcoin being frequently referred to as “digital gold,” it has struggled to match the momentum of these precious metals, achieving only a 20% rise to around $113,000. This stark contrast highlights a significant trend in the market: precious metals are being embraced as reliable safe havens and effective inflation hedges amidst a turbulent fiscal outlook for advanced economies. The escalating threats to the Federal Reserve’s independence and ongoing trade tensions, particularly stemming from the Trump administration, have further solidified the appeal of these traditional assets.
Central banks have played a pivotal role in supporting gold and its counterparts, with a notable diversification into gold contributing significantly to their prices. A European Central Bank study indicates that global central banks hold approximately 36,000 metric tons of gold. The trend of increasing gold reserves began following the COVID-19 pandemic and picked up speed after Russia’s invasion of Ukraine in 2022, both events contributing to heightened inflationary pressures worldwide. Over the past three years, these institutions have added more than 1,000 metric tons of gold annually, representing a record pace that is more than double the average from the previous decade.
In contrast, bitcoin has not yet found its way into the balance sheets of central banks, which limits its potential as a reserve asset. Additionally, bitcoin’s growth may have faced constraints due to ongoing liquidations from older wallets above the $110,000 price point. Such distributions have reportedly countered the inflows from exchange-traded funds (ETFs), further complicating bitcoin’s market standing.
As the year progresses, the divergence between the performance of precious metals and bitcoin raises important questions about the future roles of these assets in an evolving economic landscape.
