JPMorgan Chase and Co JPM analysts are observing a trend where investors are increasingly turning to gold and Bitcoin as “safe-haven” assets amid rising geopolitical tensions and the upcoming U.S. presidential election.
What Happened: This shift, referred to as the “debasement trade,” is driven by concerns over economic instability and currency devaluation, The Block reported.
“Rising geopolitical tensions and the coming U.S. election are likely to reinforce what some investors call the ‘debasement trade’ thus favoring both gold and Bitcoin BTC/USD,” J.P. Morgan’s team, including analysts Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole and Krutik P Mehta, noted in their recent report.
Gold’s price initially showed a muted response to recent geopolitical events but surged to almost $2,700 on Sep. 26.
This rise is partly due to a decline in the dollar by about 4-5% and a significant drop in real U.S. Treasury yields by 50-80 basis points.
Yet, the analysts argue that these factors alone do not fully explain the sharp increase in gold’s value, indicating the return of the “debasement trade.”
The "debasement trade" is influenced by a mix of factors, including the escalation of geopolitical uncertainties since 2022, ongoing inflation concerns, large government deficits in major economies, and a weakening confidence in fiat currencies, particularly in certain emerging markets.
Why It Matters: The current geopolitical climate, including conflicts like the Iran-Israel situation, has heightened market volatility. According to Santiment, the Fear and Greed Index has shifted into the fear zone, reflecting the market’s uncertainty.
Additionally, Charles Edwards, founder of Capriole Investments, suggested that Bitcoin’s strong correlation with U.S. liquidity measures and gold’s recent breakout to new highs indicate a bullish outlook for Bitcoin. He noted that Bitcoin tends to lag gold by a few months, suggesting it could follow gold’s upward trajectory.
What’s Next: To gain further insights into these developments, the upcoming Benzinga Future of Digital Assets event on Nov. 19 will provide an ideal platform for investors and enthusiasts alike to deepen their understanding of such trends.
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