Gold Losing Safe Haven Status Due to Cryptocurrencies, Monetary Policy

Gold prices jumped 1% on Tuesday morning, fueled by geopolitical and market concerns, with the latest North Korean missile launch being the immediate catalyst.

Gold Price

(Gold Prices 2017. Source: Bloomberg Financial)

However, according to Bloomberg, the jump in gold prices is a ‘too little too late’ response to the general state of geopolitics and market uncertainties. The precious metal appears to be losing its ‘safe haven’ status. Traditional models should have gold prices well above what they are now, and there are two things to blame for gold’s relatively poor performance.

Eroding Gold

Part of the reason gold hasn’t performed as well as expected is because investors are shifting their funds to digital currencies. Currencies such as Bitcoin have held their value quite well during recent crises, such as Venezuela’s hyperinflation.

Unconventional monetary policies by central banks has also eroded a bit of gold’s value. The unwinding of central bank balance sheets which must eventually happen is leaving investors nervous. Some of them are seeking a safe haven in Bitcoin.

Investors have fled the precious metals and stock markets in favor of the greater returns and general stability of Bitcoin and other cryptocurrencies. Over $30 billion has flowed out of the stock market in the past 10 weeks, moving into other investment options.