Asset AllocationNovember 17, 2021

Gold and Bitcoin, Seen as Opposites, Will Become Co-Equals, Says Market Savant

To Peter Boockvar, the two seeming rivals have a lot in common, and will ‘complement’ each other in time.

Reported by Larry Ligh

Maybe gold and Bitcoin aren’t that different after all and can end up as desirable refuges during inflationary times and other periods of economic instability. That’s the contrarian take on the two asset classes that many view as polar opposites, from Peter Boockvar, CIO at Bleakley Advisory Group.

“They have a lot of commonality,” Boockvar told CNBC. “They can very much complement each other.” He noted that gold lovers and Bitcoin fans are both against central banks and “want a stable currency.”

A Bloomberg Intelligence report agreed and pointed out that, while gold’s price is less volatile than that of Bitcoin, they both have virtually zero correlation to traditional asset classes, i.e., stocks and bonds.

There has been a lot of talk about the leading digital currency supplanting gold as a store of value. JPMorgan has opined that the price of gold would “suffer” at the hands of Bitcoin, the leading cryptocurrency. Thus far this year, the crypto offering seems to have the edge: Bitcoin has doubled in price, while gold has fallen slightly, down 2.2%. But lately, the momentum has shifted to the precious metal, up 0.4% Tuesday and 5.7% for the past 30 days, with Bitcoin falling 4.4% yesterday and off 1.4% since mid-October.

Any number of factors could be at work to animate the recent price swings. Talk is rife in Washington and in other nations’ capitals about the regulation of Bitcoin and other digital denominations. No one is thinking about regulating gold. Historically, gold has been the go-to sanctuary amid rampant inflation, economic downturns, or civil unrest. Some think that the recent inflation leap, up 6.2% in October annually, may have resurrected gold’s longstanding role as the commodity that flourishes when times get iffy.

To Boockvar, the notion of gold’s eclipse is absurd. Pronouncing himself a “gold bug,” he explained that “something that has been around just 13 years won’t replace something that has been around for thousands of years.” Indeed, gold is obviously different from Bitcoin in that the metal has a physical presence and is difficult to move. A gold bar, which is about the size of a brick, weighs around 25 pounds. That gold bar, at $1,856 an ounce as of Tuesday’s market close, is worth $742,400. Transporting 10 of them (more than $7.4 million and weighing 250 pounds) is laborious. With Bitcoin, an equivalent amount could be transported with a few clicks.

But both assets will come to be seen by investors as close cousins, Boockvar reasoned, and even interchangeable. “I don’t believe you’ll have to choose between one or the other” as the better bet, he contended.

Bitcoin, now widely regarded as a speculative asset, as opposed to gold, will in time be recognized as a solid store of value, Bloomberg predicted. Meanwhile, the report went on, “many institutions and investors are converting at least small portions of their gold positions to Bitcoin as a hedge and diversifier.”