Gold prices rose on Tuesday, trading at 4,305 USD per ounce, which is close to the all-time high of 4,381 USD in October
This push reflects a broad inflow into safe assets, as investors grapple with uncertain monetary policy and seek inflation hedges, with the market pricing in a 76% chance of another rate cut in January, increasing gold's appeal as a non-yielding asset
Historical divergence signals a key turning point
The US dollar is near its lowest level in two months during Asian trading hours, continuing to provide additional support for gold. This year, gold has surged over 64%, marking the best annual return since 1979 due to the Federal Reserve's interest rate cuts, ongoing gold purchases by central banks, and a steady inflow into gold ETFs, all of which support this upward trend.
Holdings in gold ETFs have increased every month this year except for May, according to the World Gold Council. This underscores the continued demand for safe-haven assets among investors, and as interest rates decline, the opportunity cost of holding gold decreases, making gold even more attractive compared to interest-bearing assets.
Meanwhile, Bitcoin continues to trade near 86,000 USD after a significant sell-off, resulting in the liquidation of Long positions worth 200 million USD within an hour on Monday. This leading cryptocurrency remains approximately 30% away from its October peak of 126,210 USD. In volatile market conditions, gold is viewed as a safe-haven asset, while Bitcoin tends to move like a risky asset and faces capital outflows when seeking stability.
The widening gap between gold and Bitcoin prices has caught the attention of market analysts. Crypto trader Michaël van de Poppe noted that Bitcoin's Relative Strength Index compared to gold has dropped below 30 for the fourth time in history.
Technical analysis by analyst misterrcrypto also supports this view, noting that the BTC/Gold pair has tested the long-term upward support line for the fourth time since 2019, with a Z-Score of -1.76, indicating it is entering oversold territory, and each time it touches this support line, there has been a significant recovery.
However, technical patterns do not guarantee future direction, as the current macroeconomic environment differs from previous cycles, with inflation remaining high and geopolitical risks still supporting gold demand, while the level at which investors will rotate from gold to Bitcoin remains uncertain.
Macroeconomic factors to watch
The market is closely watching US economic data this week to fill the gap caused by the six-week federal agency shutdown. The Bureau of Labor Statistics is set to release the long-awaited employment report for October and November this Tuesday. However, some key details will be missing, including the October unemployment rate, resulting in a gap in this important data set for the first time.
Economists forecast that employment will rise by 50,000 jobs and the unemployment rate will be 4.5%, consistent with a labor market that is sluggish yet stable. Should the figures come in slightly below expectations, it would bolster the likelihood of further interest rate cuts, according to Morgan Stanley strategist Michael Wilson.
The Federal Reserve lowered interest rates by 25 basis points last week but signaled a pause as inflation remains elevated. However, Federal Reserve Governor Stephen Miran stated that the current inflation above the target range does not reflect underlying mechanics, asserting that prices are stabilizing once again. Investors are assessing a 76% chance of another rate cut in January.
Technical outlook
Bitcoin options data indicates a high level of open interest, particularly around the expiration date of December 26, where there is heavy positioning at a target price of 100,000 USD. Analysts have indicated a gamma range of 86,000 to 110,000 USD, suggesting increased volatility as traders adjust their positions ahead of year-end.
Silver prices, which have more than doubled this year, reflecting a gain of 121%, have corrected from last Friday's peak of 64.65 USD but remain close to record levels. Silver prices have risen due to tight inventories, strong industrial demand, and being included in the list of critical minerals by the United States.
As gold approaches new highs and Bitcoin moves within a key support level, the coming week may determine whether the historical divergence between the two assets will return to balance through asset switching or continue to diverge further.
