The gold bull market kicked into high gear on Wednesday, with the yellow metal climbing 6% to exceed $5,400 an ounce for the first time.
Silver and platinum saw even larger percentage gains, but gold, with a market cap of around $40 trillion, was certainly the standout asset.
A significant portion of gold’s gains came following comments by Federal Reserve Chairman Jerome Powell at a news conference following the central bank’s universally expected decision to keep its benchmark federal funds rate range steady at 3.50%.
Asked directly about the rapid rise in gold and silver prices, Powell cautioned against overinterpreting the rally as a macro signal. “Don’t take too many messages in [that] macroeconomically,” he said, adding that while some might argue the Fed is losing credibility, “that’s simply not the case.”
“If you look at where inflation expectations are, our credibility is exactly where it needs to be,” Powell said. Gold bulls apparently thought otherwise.
Where is Bitcoin going?
Bitcoin The bulls, meanwhile, continued to watch from the sidelines as real gold once again significantly outperformed its digital counterpart. Prices traded in an extremely tight range throughout the day, then fell slightly following the Fed’s decision and recently traded at $89,000, steady over the past 24 hours.
The prices of the rest of the major cryptocurrencies followed similar action.
U.S. stocks were also little changed on Wednesday as investors awaited results from companies like Microsoft, Meta and Tesla.
Is Bitcoin losing its numerical advantage?
Despite the macroeconomic headwinds often touted as benefitting Bitcoin as “digital gold” – including a weaker US dollar and growing geopolitical risk – BTC has struggled recently, while gold is now up more than 90% in the past 12 months.
The contrast casts a shadow over Bitcoin’s supposed role as a macro hedge, especially since the assets it was designed to compete with are outperforming, argued James Harris, CEO of yield platform Tesseract Group.
“We are clearly in a market regime where cryptocurrencies are underperforming some of the assets they were designed to supplant,” Harris said in a note. “Some of this outperformance is almost certainly due to a reassessment of geopolitical and fiscal risk, but it also reflects gold’s recapture of relative market share from bitcoin.”
