It’s been a wild couple of days for the gold and Bitcoin markets in 2021. On January 2, gold prices broke through $2,000 an ounce for the first time in history. Just a few days later, Bitcoin raced past the $35,000 mark.
The gold rally was triggered by a combination of investor anxiety about ongoing geopolitical tensions and a weakening U.S. dollar, which made gold more attractive as a safe haven asset. This is the same dynamic that has propelled gold higher throughout 2020 and its extension into 2021 has been remarkable. The global benchmark for gold prices, pegged to the U.S. dollar, first crossed the $2,000 benchmark in August 2020, but it had failed to breach that psychologically important level since then.
While gold has been on a tear for the past year, it’s been nothing compared to Bitcoin. The cryptocurrency began 2020 around $7,000 and has seen a near fivefold increase in its price since then. BTC broke above the important $20,000 milestone for the first time in December 2020, propelling the cryptocurrency markets into a bona fide bull market.
Since then, Bitcoin’s momentum has only gotten stronger as institutional investors have become increasingly comfortable with the asset. Accordingly, there has been a rush of money into the Bitcoin markets as investors view it as a safe haven asset in its own right. As a result, the cryptocurrency has soared past the $35,000 mark and is aiming for higher levels.
The fact that two radically different asset classes are simultaneously reaching all-time highs speaks to the sense of unease and volatility in global financial markets. Gold has long provided investors with a safe haven during times of market uncertainty and it appears that Bitcoin has achieved a similar status, for the time being. Whether these highs are maintained over the long term is uncertain, but for the moment both gold and Bitcoin are in demand.