Bitcoin's correlation to gold hits 11-month low amid capital reallocation, analysts say

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The Block2024/11/12 16:00

By:The Block

Quick Take Bitcoin’s correlation with gold has dropped to an 11-month low. Gold prices are down over 5%, while bitcoin has posted substantial gains in the past week. Gold’s decline comes amid a stronger U.S. dollar and rising Treasury yields following Trump’s election. Markets appear to be anticipating inflationary policies that may prompt the Fed to slow rate cuts.

Bitcoin's correlation to gold hits 11-month low amid capital reallocation, analysts say image 0

Since the U.S. presidential election, gold has dropped by 5% while bitcoin has surged by over 20% — highlighting a shift in the correlation between these two assets. Some analysts suggest that capital is moving out of gold and into bitcoin as investors reevaluate their safe-haven strategies.

"Bitcoin is gaining traction as 'digital gold,' and this movement appears increasingly structural, with capital reallocating from traditional safe havens like gold into crypto," QCP Capital analysts said.

Meanwhile, K33 Head of Research Vetle Lunde noted that bitcoin’s correlation to gold has reached an 11-month low following the election, reinforcing the notion that the digital asset is carving out its own narrative amid economic uncertainty.

The 30-day correlation of bitcoin versus gold has fallen to an 11-month low. Image: K33

At a market cap of $1.73 trillion, bitcoin recently surpassed the value of silver — though it still trails far behind gold’s $17.5 trillion market. However, QCP Capital analysts suggest that even a small reallocation—just 1% of capital from gold into bitcoin —could drive the digital asset's price up to nearly $97,000.

Trump’s election win poses challenges for gold

Bitcoin’s diverging performance from gold is occurring alongside a strengthening U.S. dollar. Since Trump’s election, markets are anticipating policies—such as trade tariffs—that could fuel inflation, pushing U.S. Treasury yields and the dollar higher. This shift reflects speculation that the Federal Reserve might slow its rate-cutting cycle to counter potential inflationary effects from Trump’s policy agenda.

Minneapolis Federal Reserve President Neel Kashkari warned that Trump's proposed tariffs could elevate long-term inflation if other countries retaliate. Speaking to CBS’s Face the Nation on Sunday, Kashkari noted that “one-time tariffs” shouldn’t significantly impact long-term inflation, but that an “escalating tit-for-tat” trade war could create greater risks and uncertainty.

As Treasury yields and the dollar climb, gold becomes less appealing. This likely contributed to recent declines in gold prices, as traders appear to be locking in profits on gold shorts and USD long positions.

Additionally, Trump’s policies are shaping market expectations for the Fed’s December meeting. Currently, traders see a 65% chance of a 0.25% rate cut in December, down from 84% at the end of last month, according to the CME Fedwatch tool.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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