Gold prices have risen slightly on Tuesday, trading at $4,305 per ounce. This is close to the record high of $4,381 in October.
This upward trend shows that investors are seeking safe assets amid uncertain monetary policies and looking for inflation hedging tools. The market reflects a 76% possibility of an additional interest rate cut in January, further enhancing the appeal of gold, a non-interest-bearing asset.
Historical Discrepancy... Turning Point Signal
The US dollar has been moving near its lowest level in the last two months during the Asian session, providing additional upward momentum for gold prices. Gold prices have surged over 64% this year, recording the highest annual return since 1979. The Federal Reserve's interest rate cuts, steady central bank purchases, and continuous inflows into gold-based ETFs have driven the upward trend.
According to the World Gold Council, gold-based exchange-traded fund holdings have increased in every month this year except for May. This reflects a steady preference for safe-haven assets among investors. As interest rates decline, the opportunity cost of holding gold decreases, making it more attractive compared to interest-paying assets.
Meanwhile, Bitcoin is fluctuating around $86,000 after a forced liquidation of long positions worth $200 million on Monday. This leading cryptocurrency is currently about 30% lower than its October peak of $126,210. While gold serves as a safe haven during unstable times, Bitcoin is treated as a risk asset, seeing funds flow out when investors seek safety.
The widening gap between gold and Bitcoin is attracting the attention of market analysts. Cryptocurrency trader Michael van de Poppe pointed out that Bitcoin's relative strength index (RSI) compared to gold has fallen below 30 for the fourth time in history.
Another analyst, misterrcrypto, also supports this view through technical analysis. He shows that the BTC/Gold pair is testing a long-term uptrend support zone for the fourth time since 2019. The Z-Score is -1.76, indicating an oversold condition, and significant rebounds have historically occurred at this support level.
However, technical patterns do not guarantee future movements. The current macroeconomic environment is different from previous business cycles, characterized by high inflation and geopolitical risks that are continuously driving gold demand. It remains uncertain how much investors will shift assets from gold to Bitcoin.
Macro Factors Attention
Market participants are focusing on this week's US economic indicators to fill the gap caused by a six-week government shutdown. The US Bureau of Labor Statistics will release a long-awaited consolidated employment report covering October and November on Tuesday. However, this report will lack key information, including the October unemployment rate, resulting in the first-ever gap in related statistics.
Economists forecast an increase of 50,000 jobs and an unemployment rate of 4.5%. This indicates a slowing but stable labor market. According to Morgan Stanley strategist Michael Wilson, even if the figures come in somewhat weak, it will increase the likelihood of interest rate cuts.
The Federal Reserve lowered the benchmark interest rate by 0.25 percentage points last week, but indicated that a temporary hold on interest rates is likely in the face of persistent inflation. However, Fed official Stephen Miran explained on Monday, "Current inflation exceeding the target does not reflect the underlying conditions, and prices are stabilizing again." Investors are currently reflecting a 76% probability of an additional rate cut in January.
Technical Outlook
Bitcoin options data shows a large open interest centered around the December 26 expiration. Many positions are piled up at the $100,000 strike price, with a gamma band forming between $86,000 and $110,000. Analysts report that volatility is expected to increase as traders adjust positions ahead of year-end.
Silver prices have risen by 121% this year, more than doubling, and although they slightly fell from last Friday's all-time high of $64.65, they remain near historical peaks. Supply shortages, robust industrial demand, and the inclusion of strategic minerals on the US list have driven the upward trend in silver.
As gold prices approach all-time highs and Bitcoin consolidates near key support levels, it will be determined in the coming weeks whether the historical gap between the two assets will be resolved through asset rotation or lead to further divergence.
