Is It Time To Own Gold Or Bitcoin?
Just like your house provides you with a shelter from all the dangers (to a certain extent), investing in a safe haven provides the same comfort. A safe haven is a precautionary trade which investors trade under heightened uncertainty. The ultimate safe haven trade for investors has been the yellow shining metal, however, a new popular derivative which is behaving like a safe haven is cryptocurrency. Bitcoin stands tall in that basket because as of today the collective market cap of all the cryptocurrencies has reached a $161 billion for the first time. The acceptance of Bitcoin has been phenomenal especially this year (it has been highly volatile as well).
Heightened Geopolitics Moving Gold & Bitcoin
Investors have panicked after the North Korean missiles have flown over Japan and the president of Japan has called the action reckless. The Asian markets have felt the pain of this event (the Nikkei and HSI indices dropped -0.45% and -0.35% respectively) and the situation is equally intense for the European and U.S. markets. I would expect this pain to become more stark as the counter-reaction from the US would make investors only more nervous. Statements such as "all options are on the table" are the most worrying.
The price of gold and Bitcoin are showing solid gains and this is nothing more than a risk off trade. The question is, which one is more reliable? Of course, gold has a massive history to back this thesis because Bitcoin is relatively new. However, this is not to say that Bitcoin cannot be considered as a safe haven trade. In the beginning of August, gold price bounced by $31 (from the lows of $1258.80 an ounce) due to the heightened tensions between the US and North Korea. Similarly, Bitcoin price was trading somewhere near $1985 per coin in the middle of July and as the hostilities between the two nations heightened, the price skyrocketed to $3000. Thus, it is evidently clear that investors have used Bitcoin as another tool to hedge their risk. Simply put, they are considering Bitcoin as a safe haven currency. The below chart shows the performance of the both derivatives.