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Gold is a better bet than Bitcoin as market risk rises - Goldman Sachs

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(Kitco News) - The debate between Bitcoin and gold continues to rage and Goldman Sachs' commodity team expects the precious metal to have the advantage in 2022 as market volatility picks up.

While gold prices remain anchored around $1,800 an ounce, Bitcoin has suffered significant losses falling roughly 20% in January, its worst start to the year since its inception. Bitcoin last traded around $36,000 per token, down more than 50% from its record highs in November.

In a report published last week, commodity analysts at Goldman Sachs said that slower economic growth in 2022 will continue to weigh on the leading cryptocurrencies.

"While there is not yet talk of recession, our economists forecast a material deceleration in US growth," the analysts said. "It is important to remember that risk-aversion is a major driver of investment interest in gold vs. assets such as equities and, to an even larger extent, vs. Bitcoin. In our view, gold is a risk-off inflation hedge while Bitcoin is a risk-on inflation hedge. For investors looking for a way to hedge their portfolios from risks of a growth-slowdown and falling valuations, we believe a long gold position would be more effective in the current macro environment."

The analysts noted that although Bitcoin saw record nominal returns last year, the market's risk-adjusted returns underperformed the overall market.

Bitcoin to reach $5 trillion market cap in 5-7 years - Robert Breedlove

"As we have often said, we believe this is driven by crypto's lack of use beyond a digital store of value, indicating to us that it is still too early for crypto to compete with gold or the dollar for defensive asset investment flows," the analysts said.

Bitcoin hasn't suffered alone as investors start to pare back risks in their portfolios. The volatile tech sector has suffered significantly, with the Nasdaq down more than 11% since the start of the year.

Thursday has been particularly devastating for Facebook; the social media company dropped more than 20%, losing more than $200 billion in value during the session. The selloff was prompted after the company reported a drop in daily active users for the first time in 18 years.

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.