Key Points
- The Bitcoin-gold ratio has hit a 12-week low, amidst rising demand for gold.
- Despite substantial inflows into Bitcoin ETFs, Bitcoin’s price remains weak.
The escalating fears of a trade war, potentially instigated by the US, seem to have created a favorable environment for gold (XAU). The precious metal has gained an edge over Bitcoin (BTC), causing the Bitcoin-gold ratio to plunge to its lowest point in over three months.
Gold continues to strengthen its reputation as a reliable store of value, while Bitcoin is finding it hard to gain momentum. Data from TradingView shows that the ratio of Bitcoin’s price in US dollars to the price of gold per ounce has dropped to 34. This is the lowest it has been since mid-November 2024, and it marks a 15.4% decrease from December, when it exceeded 40.
Factors Behind Gold’s Shine
The current surge in gold’s value can be attributed to several interconnected factors. Firstly, there is a high demand for the asset, which has seen its year-to-date price increase by roughly 10% to a record high of $2,877 per ounce.
The ongoing trade tensions between the US and China have left investors with limited options. Many are now opting for gold as a safe haven for their funds in these uncertain times.
In addition, demand for gold is currently soaring in China due to the Spring Festival holidays. All these factors are putting pressure on gold’s supply, thereby driving its value upwards.
On the supply side, tariffs on metal products have been increasing, which has been impacting the gold market. For instance, futures prices for gold on the Comex exchange have been trading much higher than spot prices. This has led to an increase in shipments of physical gold to the US in recent months.
Even JPMorgan, the investment banking giant, is following this trend. The bank has recently announced plans to deliver $4 billion worth of gold bullion to New York in February.
Bitcoin ETF Inflows Not Impacting Prices
In contrast to gold, Bitcoin’s price has remained relatively stagnant, despite US-listed spot Bitcoin exchange-traded funds (ETFs) experiencing a significant influx of capital recently.
To put this into context, these ETFs have attracted over $4 billion in investments in just about three weeks. However, analysts believe that there is a reason why these inflows have not significantly affected Bitcoin’s value. They suggest that the capital is likely to have come mostly from traders engaging in arbitrage trading, rather than genuine demand for the asset.
