Blind rush from investors' gold to bitcoin for hedging against inflation

More than ૧૦ 10 billion withdrawn from largest gold ETFs this year

- In the current calendar year, against the negative return of 7.1 per cent in gold, Bitcoin is on the rise.

Bitcoin is being called the digital gold of the 21st century. Speculators, traders and even ordinary people are tempted to invest in other cryptocurrencies, including Bitcoin. The picture is emerging that traders-speculators are now investing more in cryptocurrencies instead of gold for hedging against the skyrocketing inflation following the Corona epidemic. In other words, investors are rushing to buy a decade-old digital gold (cryptocurrency) by withdrawing capital from precious metal gold.

According to Bloomberg, more than ૧૦ 10 billion has been withdrawn from the largest gold exchange traded fund this year, and the amount of physical gold is also being sold. Last week, gold was trading at ૧ 1.2 an ounce, down 2.1 per cent in calendar year 2021, meaning investors have seen a negative return on gold this year.

On the other hand, the price of cryptocurrency Bitcoin has skyrocketed. Recently, the price of Bitcoin jumped to a new all-time high of 5,000. So far in the calendar year 2021, Bitcoin has risen by 150 per cent in the last one month with a rise of 3 per cent. Compared to gold, Bitcoin has doubled its returns in the current calendar year.

Speculators and investors are beginning to see Bitcoin and other cryptocurrencies as hedging for inflation. Traders who have been selling gold for years admit that times are changing. "We have no interest in our strategy right now," said a leading portfolio manager.

Gold has long been promoted as a protection against the declining purchasing power of fiat currencies such as the dollar. Rising renewed demand, a disrupted commodity supply chain and stimulus packages from central banks are fueling concerns that fuel inflation and demand in general, which has generally supported gold prices and demand.

However, with the dollar strengthening and the price of gold declining with the recovery in the US economy, investors are now looking elsewhere for hedging investment resources.

Mohammed Al-Arian, head of Queen's College, Cambridge and chief financial adviser at Allianz, said: 'Bitcoin has drawn money from gold to itself.' Hedge fund managers are now prioritizing cryptocurrencies over gold to protect against inflation.