Make Kitco Your Homepage

What does bitcoin at $100k mean for gold price? Goldman weighs in

Kitco News

(Kitco News) Bitcoin will continue to take investment flows from gold in 2022 as both assets compete to be stores of value amid these inflationary times, according to a note published by Goldman Sachs.

The latest bitcoins float-adjusted market capitalization estimates put the value at $700 billion compared to around $2.6 trillion worth of gold owned as an investment, said Goldman Sachs analyst Zach Pandl. This translates to bitcoin representing a 20% share of the "store of value" market.

And as crypto adoption continues to increase, so will bitcoin's share of that market, Goldman's analyst said in his 2022 prediction. This is why Goldman is forecasting a "hypothetical" scenario in which if bitcoin's "store of value" share were to expand to 50%, its price would rise to more than $100,000.

"Bitcoin may have applications beyond simply a 'store of value' - and digital asset markets are much bigger than Bitcoin - but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for Bitcoin returns," Pandl wrote.

The more bitcoin is used as a store of value, the higher its price can go. And analysts can use the former measure to help determine the crypto's potential price scale.

At the time of writing, bitcoin was trading at $46,345.37, down 1.3% on the day, with the total market cap at $877.5 billion. The digital asset remains in consolidation mode after hitting a new all-time high of $69,000 in November.

Analysts are saying that the world's largest cryptocurrency needs a catalyst before resuming its rally.

"Bitcoin is in desperate need of a catalyst as crypto traders struggle to buy ahead of the beginning of a Fed rate hiking cycle," said OANDA senior market analyst Edward Moya. "The cryptoverse remains long-term bullish with Bitcoin and Ethereum but the short-term downward move might not be over. Bitcoin has key support at the $45,500 level and after that it could be a freefall to $40,000."

U.S. Mint sees strongest gold coin sales in 12 years, sells 1.25 million ounces in 2021

Gold has started off the year on a stronger footing, managing to hold gains above $1,800 an ounce. February Comes gold futures were last at 1,825.70, up 0.61% on the day. Analysts point to geopolitical risks and a weaker U.S. dollar as possible triggers for higher prices down the road.

"As investors look at the year ahead, gold should benefit on both growing geopolitical risks (Russia/Ukraine, Turkey, and North Korea) and as a weaker dollar emerges from the outperformance with European and Asian equities," Moya noted. "Gold prices are comfortably above key support levels that include the 50- and 200-day SMAs along with the psychological $1800 level. Gold should hold remain fairly stable leading up to the nonfarm payroll report."

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.