Gold is better portfolio diversifier than bitcoin -Goldman Sachs

Goldman Sachs expects gold, with its real demand drivers, to outperform the highly volatile bitcoin in the long term, the bank wrote in a Monday research note.

diversifying with gold

Gold is less likely to be influenced by tighter financial conditions, meaning it is “a useful portfolio diversifier,” said Goldman, especially given that gold has developed non-speculative use cases while bitcoin is still looking for one.

Goldman’s analysis showed that while traders use gold to hedge against inflation and dollar debasement, bitcoin resembles a “risk-on high-growth tech company stock.”

The value proposition of bitcoin, which the bank called “a solution looking for a problem,” comes from the scope of its future real use cases, making it a more volatile and speculative asset than the precious metal.

Although investors’ willingness to explore the decentralized currency aided bitcoin adoption, the bank forecast financial conditions will become tighter.

“Bitcoin’s volatility to the downside was also enhanced by systemic concerns as several large players filed for bankruptcy,” it noted, citing the collapse of the FTX exchange and the 3AC hedge fund.

While net speculative positions in both the assets fell sharply over the last year, gold is marginally up year-on-year against bitcoin’s plunge by 75%, the bank noted.

“Tighter liquidity should be a smaller drag on gold, which is more exposed to real demand drivers” like Asian consumer buying, central bank monetary demand, safe-haven investments, and industrial applications, it said.

“Moreover, gold may benefit from structurally higher macro volatility and a need to diversify equity exposure.”

Gold has been historically stable and has been used as a currency or trading since the dawn of civilization. Not to mention it’s nice to have something that you can actually hold in your hand vs being on a exchange that has control of your asset(s). It’s typically smart for traders and investors to diversify with gold and silver. I’m sure you have heard of the term not putting all your eggs in one basket. That’s why you should be diversifying with gold.

source: yahoo

Disclaimer:

we are not financial advisors, nor do we claim to be, please consult an investment advisor before investing as you may lose your entire investment. This piece is an opinion piece and the ideas Herin may change with time as economics and prices are rapidly changing.