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Recession alert: Why gold could outshine Bitcoin in a downturn

Recession alert: Why gold could outshine Bitcoin in a downturn
Ana Zirojevic

As seasoned investors and financial experts all around increasingly agree that the United States is heading toward a recession, some asset classes might perform better than others as the depression unfolds, according to Bloomberg’s senior commodities specialist Mike McGlone.

Specifically, as per McGlone’s analysis, gold could be in a more favorable position in comparison to the flagship cryptocurrency, Bitcoin (BTC), during this recession, particularly if it involves a stock market slump, as demonstrated on a chart showing the 100-week moving average (MA) of both gold and Bitcoin, which the expert shared on May 7.

Gold vs. Bitcoin momentum. Source: Mike McGlone/Bloomberg Intelligence

As McGlone explained:

“Momentum and the tilt toward a US recession may give gold an advantage over Bitcoin in 2023, notably if the stock market declines. The metal moving upward vs. declines for the crypto is the current trajectory on a 100-week basis, and the key question is what stops the trend.”

Gold price analysis

Interestingly, gold earlier saw a strong upward move, to $2,052 per ounce, as the Federal Reserve hiked interest rates 25 basis points – to 5.25% – their highest level in more than two decades, signaling its correlation with the rising interest rates, as Finbold reported on May 4.

At press time, gold was trading at the price of $2,023 per ounce, almost $30 lower than its peak from a few days ago, but still 0.74% or $17 higher than a month ago, according to the most recent information retrieved by Finbold from the platform BullionVault on May 8.

Gold 30-day price chart. Source: BullionVault

Bitcoin price analysis

As for Bitcoin, the commodities expert has voiced his opinion that the maiden digital asset “sustaining above $30,000 resistance would be an initial indication of the tide turning for all cryptos, but the ceiling appears to be strengthening as of May 2.”

“It’s the higher correlation to the stock market and risk assets vs. gold that we see placing Bitcoin in a vulnerable position at the start of May,” he added.

Indeed, Bitcoin was at press time changing hands at the price of $27,967, down 3.19% on the day and declining 4.7% across the previous week while still writing down a modest gain of 0.12% on its monthly chart, according to the latest data retrieved on May 8.

Bitcoin 30-day price chart. Source: Finbold

Looking ahead

Finally, as McGlone concluded, there is a “consensus for a soft landing and that the worst is over is similar in equities and cryptos, with the latter having the higher beta and tendency to be a leading indicator. Bloomberg Economics’ recession projections have moved toward July.”

Meanwhile, Société Générale’s strategist Albert Edwards has argued that “the official US leading indicator tells us a recession is a done deal, not tomorrow, not next week, but today,” which he believes will “lead to a collapse in margins and profits,” and likely include stocks, which closely relate to corporate profits and earnings, as Insider reported on May 6.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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