(Kitco News) – The coming year will be driven by geopolitical fragmentation, competing trade blocks, and de-dollarization, and in order to navigate this new world successfully, investors will need to leverage diversifiers like gold and Bitcoin, according to BlackRock.
In their 2025 Global Outlook, the world’s largest asset manager said that the geopolitical landscape will be characterized by intensifying fragmentation in the year ahead, which is likely to accelerate de-dollarization and support gold purchases.
“Elevated global tensions are accelerating the rewiring of supply chains,” wrote Tom Donilon, Chairman of the BlackRock Investment Institute, “and the formation of competing geopolitical and economic blocs. A second Trump administration is likely to reinforce those trends. We see that playing out in tech, energy and financial markets.”
“U.S.-China competition is set to intensify in 2025 as tariffs and policies focused on decoupling strategic sectors – especially advanced technologies like semiconductors – accelerate,” he added. “Any competitive edge in the race to build out AI will also be determined by the speed of building infrastructure like electricity grids and data centers.”
BlackRock believes energy has become a key front in global economic competition. “China’s cheap low-carbon technology, especially electric vehicles, solar and batteries, is putting pressure on companies in other major economies, spurring a protectionist response,” Donilon said. “European automakers are feeling the pressure as Brussels tries to coordinate a response. These dynamics will increase competition for resources. Emerging markets (EM) are key suppliers of commodities required for the low-carbon transition, such as copper, and growing markets for exports. That highlights their potential influence, with many key EMs multi-aligned among competing trading blocs.”
Donilon wrote that the “rewiring of globalization” is also being seen in reserve currencies. “As the world divides into competing blocs, and the U.S. and Western governments lean on sanctions and other restrictions for their policy response, some countries are shifting their reserves out of U.S. dollars into gold and other assets while increasingly conducting trade finance in non-dollar currencies,” he said.
Samara Cohen, BlackRock’s Chief Investment Officer of ETFs and Index Investments, said that investors will need to rely on diversifiers like gold and Bitcoin to manage risk in this increasingly fragmented world.
“The erratic correlation between stock and bond returns has defined the new regime – and government bonds have become a less reliable cushion against equity selloffs as a result,” she wrote. “We see the potential for other diversifiers, old like gold and new like bitcoin, to step in. This is not about replacing long-term bonds to find diversification but instead seeking new and distinct sources of risk and return.”
“Bitcoin’s potential as a new diversifier stems from its unique value drivers: the potential to appreciate over time when its predetermined supply is met with growing demand – and demand is based on investor belief in bitcoin’s potential to become more widely adopted as a payment technology,” Cohen said. “Case in point: The run-up to record highs after the U.S. election reflects investors upping the chance of greater adoption given President-elect Trump’s past support for bitcoin and other cryptocurrencies. Those distinct drivers should make it less correlated with stocks and other risk assets in the long term.”
Cohen said that notwithstanding the occasional spike, the correlation between Bitcoin and equities has typically been low.
“Bitcoin’s risk and return profile would change if it does achieve broad adoption,” she said. “At that point, it may be more suited as a tactical hedge against specific risks, like gold is.”
“Gold has surged as investors seek to bolster portfolios against higher inflation, and some central banks seek alternatives to major reserve currencies,” Cohen concluded. “We think it is key to monitor how the performance of these alternatives changes relative to traditional asset classes – and be nimble in using them.”
