Gold Does Well When the Fed Eases

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Gold prices have done well around Fed easing cycles. In addition, inflation concerns and high interest rates make the year-ahead gold return forecast attractive.

Much has been written recently about the impact of bitcoin ETFs (introduced in January of 2024) on investors’ portfolio allocations. The argument goes that ETFs make bitcoin more accessible to ordinary investors, and with such easy access will come large portfolio allocations, thus driving up the price of bitcoin. Whatever you think of this argument (a nice summary of different views can be found here), it is hard to argue with the fact that the price of bitcoin has skyrocketed in the weeks after the introduction of bitcoin ETFs.

bloomberg chart]

The above chart shows the spot price of bitcoin over the last three years, along with its hockey stick appreciation thus far in 2024. Alongside bitcoin is plotted the price of gold (the front gold futures contract from COMEX). The bottom chart shows their ratio, i.e., the price of a troy ounce of gold in units of bitcoin. Gold prices, denominated in units of bitcoin, have plunged close to their all-time lows from late 2021.