Gold prices are close to all-time highs while Bitcoin hits historic lows - Will there be a price shift?

Gold prices continue to rise slightly in Tuesday’s trading session, reaching $4,305 per ounce—just shy of the all-time high in October (4,381 USD).

The rally in gold reflects investors’ search for safe assets amid ongoing monetary policy uncertainties and rising inflation hedging demand. As the market forecasts a 76% probability that the US Federal Reserve (Fed) will continue to cut interest rates in January, the appeal of gold—a non-yielding asset—becomes even stronger.

Historical Divergence: A Sign of a Turning Point?

The US dollar, currently at its lowest in two months during Asian trading, further boosts gold prices. Since the beginning of the year, gold has increased by over 64%, marking its best performance since 1979. This momentum is driven by Fed rate cuts, continuous central bank purchases, and steady inflows into gold-backed ETFs.

According to the World Gold Council, holdings in gold ETFs have increased steadily each month this year, except for May, indicating strong demand for safe-haven assets. When interest rates fall, the opportunity cost of holding gold decreases, making it more attractive compared to interest-bearing investments.

Conversely, Bitcoin is currently trading below $86,000 after a sharp sell-off that liquidated $200 million in long positions in just one hour on Monday. The cryptocurrency remains about 30% below its all-time high in October (126,210 USD). While gold typically acts as a safe haven during turbulent times, Bitcoin exhibits characteristics of a risky asset, prone to capital outflows when investors prioritize stability.

The widening gap between gold and Bitcoin is attracting analyst attention. Cryptocurrency trader Michaël van de Poppe noted that Bitcoin’s RSI compared to gold has fallen below 30—a rare phenomenon, occurring only four times in history.

Technical analysis from expert misterrcrypto also concurs. He states that the BTC/Gold pair is testing its long-term support line for the fourth time since 2019. The Z-Score is currently at -1.76, in oversold territory; previous touches of this support level have led to strong rallies.

However, technical patterns do not guarantee future trends. The current macro environment differs significantly from previous cycles, with inflation remaining high and geopolitical risks continuing to support gold demand. Whether investors will shift heavily from gold to Bitcoin remains a big question.

Macro Factors from a Market Perspective

The market is closely monitoring US economic data this week to fill the information gap caused by the six-week government shutdown. The US Bureau of Labor Statistics is expected to release the comprehensive employment reports for October and November on Tuesday, but some key data, such as October’s unemployment rate, will be missing—marking the first gap in this data series.

Economists forecast an increase of 50,000 jobs and an unemployment rate of 4.5%, reflecting a slow but stable labor market. According to Morgan Stanley strategist Michael Wilson, even if the data shows moderate weakness, the likelihood of the Fed continuing rate cuts will be reinforced.

The Fed cut interest rates by 25 basis points last week but signaled a possible pause due to persistent inflation. However, Fed Governor Stephen Miran stated that current inflation does not reflect underlying drivers, affirming that “prices have now stabilized.” Investors are currently pricing in a 76% chance of a rate cut in January.

Technical Outlook

Bitcoin options data shows significant open interest focused on the December 26 expiry, with many positions at the $100,000 strike. Experts identify gamma volatility zones between $85,000 and $110,000, predicting heightened volatility as traders reposition ahead of year-end.

Silver, which has more than doubled this year with a 121% increase, has recently pulled back slightly from its record high of $64.65 on Friday but remains near historic levels. Silver’s rally has been driven by sharply reduced inventories, high industrial demand, and its inclusion in the US critical minerals list.

As gold approaches new highs and Bitcoin consolidates around key support levels, the coming weeks will be crucial in determining whether the historic divergence between these two assets will be resolved through capital rotation—or further widened.