Analysts’ Insights on Safe-Haven Assets

Analysts at J.P. Morgan suggest that increasing geopolitical tensions and November’s presidential election are driving investors towards gold and bitcoin as safe-haven assets in what they describe as the “debasement trade.”

Quote: “Rising geopolitical tensions and the coming U.S. election are likely to reinforce what some investors call the ‘debasement trade’ thus favoring both gold and bitcoin,”
J.P. Morgan Global Markets Strategy analysts Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole, and Krutik P Mehta said in a note on Thursday.

Gold initially responded more mutedly to recent geopolitical events, but its price has sharply risen over the past quarter, approaching the $2,700 level on Sept. 26.

Quote: “This increase in gold prices is influenced by a 4-5% decline in the dollar and a significant drop in real U.S. Treasury yields by 50-80 basis points. However, the appreciation of gold has exceeded what these factors alone would suggest, indicating a re-emergence of the ‘debasement trade,’” the analysts noted.

The note highlights that the “debasement trade” is driven by factors such as:
1. Heightened geopolitical uncertainty since 2022
2. Persistent inflation concerns
3. Significant government deficits in major economies
4. Waning confidence in fiat currencies, particularly in some emerging markets

A recent CryptoQuant post on X supports these claims, pointing to historical trends where lower U.S. Treasury yields have led to rising gold prices.

Quote: “In 2008, as the 13-week Treasury Bill yields decreased, gold prices soared from $590 to a peak of $1,900 per ounce by 2011. A similar trend is emerging now, with gold climbing from $2,000 to nearly $2,700. Bitcoin (BTC), often seen as ‘digital gold,’ may follow this pattern.”

Despite the current declining yields and expanding M2 Money Supply, CryptoQuant analyst J.A. Maartuun told The Block that:

Quote: “Gold is already profiting from these circumstances, while bitcoin isn’t, resulting in a current negative correlation between bitcoin and gold.”