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Bitcoin Is Biting Away At Gold's Safe-haven Appeal - Mohamed El-Erian

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(Kitco News) - The rise of bitcoin, mostly during times of duress, has some investors questioning whether the virtual currency is taking away from gold’s safe-haven allure. 

"Cryptocurrencies are not going away any time soon and are part of gold's problems," said Mohamed El-Erian, former PIMCO head and chief economic advisor for Allianz, during CME Group's annual precious metals dinner in New York Thursday.

“If you're in gold, you've had a good year up about 15%, but not really as good as you should have had given the geopolitics,” he added. 

The rise in popularity of cryptocurrencies like bitcoin have recently held back gold's gains as investors flocked to the new asset class during times of heightened tensions. 

“It's not a substitute to gold but don't underestimate when a small loyal customer base falls in love with another asset class.”

“When there is something that is new, pay attention to it to understand it. Pay attention to what cryptocurrencies are doing to your ecosystem.”

However, the longtime investor is not bullish on bitcoin, recently speaking out on the virtual currency's price. 

“I would say at least half of what it is, a third of what it is," he told CNBC on Monday when asked what it should be valued. 

Bitcoin prices dropped almost 8% on Thursday, last trading at $3,374.90. Gold prices have seen some pressure, last trading around $1,329.40 an ounce.

El-Erian's main message at the CME event was simple: once Bitcoin cools off, gold prices should benefit. 

“When cryptocurrencies hit a pothole part of the reaction will be to go back to gold,” he said. “But until that happens, gold will be affected."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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