(Kitco News) - In a comment that feels a little obvious and late to the party, analysts at JPMorgan have officially defined the unprecedented rally in gold and, to a lesser extent, Bitcoin.
In a recent note, analysts at JPMorgan observed that retail investors have begun to feel FOMO (Fear of Missing Out) for alternative assets such as gold and cryptocurrencies—a trend they are calling the “debasement trade.”
The bank explained that retail investment demand “reflects a combination of factors, which in our client conversations range from elevated geopolitical and policy uncertainty, to uncertainty about the longer-term inflation backdrop, to concerns about ‘debt debasement’ due to persistently high government deficits across major economies, to concerns about Fed independence, to waning confidence in fiat currencies in certain emerging markets in particular, and to a broader diversification away from the US dollar.”
Although gold has fallen from its highs near $3,900 an ounce, prices are still up more than 40% so far this year. Spot gold last traded at $3,847.30 an ounce, down 0.47% on the day.
Meanwhile, Bitcoin is trading at more than $120,000 per digital token, up more than 2% on the day and 28.6% year-to-date.
When it comes to retail demand, some analysts note that experts should also keep an eye on silver. Because of its lower value compared to gold, silver can attract a much larger and more diverse retail investment base.
The precious metal has been unable to hold support above $48 an ounce but is still seeing robust bullish momentum. Spot silver last traded at $46.68 an ounce, down 1.21% on the day. Silver is up more than 60% so far this year.
According to CNBC, JPMorgan has officially proclaimed the “debasement trade,” as retail investment demand for gold and Bitcoin has picked up since President Donald Trump launched his global tariffs and trade war in April.
While investment demand was strong through the summer, it has been surging with new momentum since late August, when the Federal Reserve restarted its easing cycle.
In a recent interview with Kitco News, Aakash Doshi, Head of Gold Strategy at State Street Investment Management, said September was a record month for SPDR Gold Shares (NYSE: GLD), the world’s largest gold-backed exchange-traded fund. GLD saw its gold holdings increase by 35.2 tonnes in September, with one-day inflows of 18.9 tonnes on September 19—the biggest increase on record.
While retail investors have only just begun to jump on the debasement trade, analysts note that this rally is already three years old.
Central banks have been diversifying away from the U.S. dollar and into gold since 2022, after the U.S. government weaponized the dollar in an attempt to isolate Russia for invading Ukraine.
Official global gold reserves have risen by 1,000 tonnes in the last three years, reaching their highest levels in decades. This summer, gold became the second-largest reserve asset, surpassing the euro.
Although gold prices have nearly tripled in the last three years, analysts say the rally is still in its early stages as retail demand has only just started to accelerate.
Despite last month’s record inflows, ETF gold holdings remain well below record levels seen in 2020. At the same time, trade data from the Commodity Futures Trading Commission shows speculative interest, while elevated, is still below the highs reached at the start of the year and well under the peaks reported in 2016.
Although gold prices have surged in recent years, analysts have said that there is still plenty of value in the market, as central banks are expected to continue to diversify into gold for the foreseeable future.
