Gold prices are starting to rise on Tuesday, reaching $4,305 per ounce and coming closer to the all-time high of $4,381 in October.
This rise is shaped by investors turning to safe havens in an uncertain monetary policy environment and seeking protection against inflation. In January, the probability of an interest rate cut is priced at 76% in the market, while interest in non-yielding gold is increasing significantly.
Historic Divergence Potential Signaling a Turning Point
The US dollar is trading close to two-month lows during the Asian session, providing additional strength for gold. Gold has risen over 64% since the beginning of the year, marking its best annual performance since 1979. The US Federal Reserve's (Fed) interest rate cuts, continuous purchases from central banks, and steady inflows into gold-based ETFs have fueled this rise.
Assets in gold-based cryptocurrency exchange-traded funds (ETFs) declined only in May this year, while rising in all other months. According to data from the World Gold Council, this trend shows that appetite for the safe-haven asset has persisted throughout the year. As interest rates fall, the opportunity cost of holding gold decreases, increasing its attractiveness compared to interest-bearing investment vehicles.
Meanwhile, Bitcoin continues to move around $86,000 following a sudden sell-off on Monday that resulted in the liquidation of $200 million in long positions. The leading cryptocurrency is trading about 30% below its peak of $126,210. While gold takes on the role of a safe haven during crises, Bitcoin is typically priced as a risky asset and experiences exits when investors seek safety.
The widening gap between gold and Bitcoin has also caught the attention of market analysts. Cryptocurrency trader Michaël van de Poppe noted that the Relative Strength Index for Bitcoin against gold has fallen below 30 for only the fourth time in history.
Technical analyst misterrcrypto's analyses also support this view. It shows that the BTC/Gold pair has tested its long-term rising support line for the fourth time since 2019. The Z-Score value is at -1.76 and in the oversold region. Previous touches from this level have marked the beginning of strong rallies.
However, technical signals are not a guarantee of future price movements. The current macroeconomic environment is different from past cycles: Inflation remains high and geopolitical risks continue to support demand for gold. It is uncertain whether investors will shift from gold to Bitcoin.
Focus on Macro Factors
This week, the markets are closely monitoring the economic data coming from the US. The information gap created by a six-week government shutdown makes these data more significant. The US Bureau of Labor Statistics will release the anticipated combined employment report for October and November on Tuesday. However, an important detail is missing: the unemployment rate for October will not be included in the report, creating a gap in this data series.
Economists expect an increase of 50,000 in employment and a 4.5% unemployment rate. This forecast indicates a weak but balanced labor market. According to Morgan Stanley strategist Michael Wilson, even a small weakness that may emerge in the figures would strengthen expectations for new interest rate cuts.
The Fed cut interest rates by 25 basis points last week but indicated that they do not expect a new move in the short term in the face of stubborn inflation. However, Fed Board Member Stephen Miran stated on Monday, 'Inflation above the current target does not reflect the dynamics below it. Prices have stabilized again.' Investors are currently pricing in a 76% chance of a cut in January.
Technical Outlook
Bitcoin options data shows that open positions for contracts expiring on December 26 are concentrated, with a significant buildup at the $100,000 strike price. Analysts indicate that a gamma band has formed between $86,000 and $110,000. This implies that volatility could increase as traders shift positions with the approach of year-end.
Silver has doubled this year with a 121% increase and has pulled back slightly from Friday's record level of $64.65. However, it is still hovering at historical peaks. The declining stocks, strong industrial demand, and the inclusion of critical minerals in the US list have contributed to this rally.
As gold approaches new records and Bitcoin holds significant support levels, the coming weeks will indicate whether the historic divergence between the two assets will lead to a reversal or further separation. Time is the remedy for everything; we will see market dynamics together.
