Bitcoin and gold travel on divergent paths

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By Anna J. Park

Once called the best hedging asset, gold now seems to have yielded its position to bitcoin. The two assets' divergent paths have recently become clearer, as bitcoin's price continues to soar while gold prices have taken a backseat.

On the gold market operated by the Korea Exchange (KRX), the price of the precious metal fell by 0.56 percent Friday to 63,540 won ($57.4) per gram. With the price recording a sixth consecutive day of a losing streak, its price is now at the level of last spring.

The price of gold has logged strong gains over the past two years, climbing 15 percent in 2019 and 28 percent in the first half of 2020.

However, the precious metal's price has plunged by more than 20 percent over the past six months, since the price recorded its highest at 80,100 won per gram at the KRX gold market's closing on July 28 last year.

While gold is losing its luster, bitcoin's new status as "digital gold" has been solidified as institutional financial investors and major corporations such as Tesla invest in the crypto currency.

Bitcoin's price has been on a skyrocketing bull run with its price quadrupling last year, followed by additional 80 percent jump this year alone.

Does this mean the era of gold as a traditional safe haven and hedging tool against inflation is over? Will this "digital gold" replace the unique place of the precious metal that has been maintained for more than 2,000 years?

Experts do not see eye-to-eye on the issue, as some still warn of the lack of cryptocurrency stability due to potential regulatory attempts by governments. For instance, U.S. Treasury Secretary Janet Yellen said Thursday that she regards bitcoin as a "highly speculative asset," and believes regulation will be necessary to safeguard investors.

However, the tide of change is being felt everywhere. Although the general consensus is that the cryptocurrency asset is not as mature as gold, due to its volatility, its attractiveness as a future investment is hard to deny.

Jeffrey Gundlach, CEO of DoubleLine Capital, who's been called the "King of Bonds" for his stable asset management of more than $130 billion, used to say that he didn't believe in bitcoin. But he now says "bitcoin may be the stimulus asset," in a recent Twitter message Thursday.

BlackRock's Managing Director and Chief Investment Officer Rick Rieder also said bitcoin investing would be "the best storehouse in terms of value" in a recent interview.

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