The gold prices used in this table and chart are supplied by FastMarkets. Where the gold price is presented in currencies other than the US dollar, it is converted into the local currency unit using the foreign exchange rate at the time (or as close to as possible).
Gold trades $150bn a day, nearly 100x that of bitcoin
Gold pricing is consistent across exchanges in all forms
Some bitcoin futures markets have closed due to lack of trading, and price discrepancies exist across exchanges
Physical gold can be bought for a small percentage above spot price, and purchasing gold via allocated, physically-backed gold ETFs can cost less than a basis point over spot
As an example, Bitcoin charges many percentage points (we’ve seen as high as 9% on some exchanges) via the process of the bid/ask spreads and entering and exiting positions
The most liquid bitcoin closed-end exchange traded product currently trades 40% above its net asset value. This means that investors have to wait for a 40% appreciation before they can realise their investment’s face value.
We have seen how lack of regulation has led to multiple crypto exchange defaults and fraudulent activity, resulting in losses amounting to billions
The government could begin to regulate cryptocurrencies by directly or indirectly discouraging investors’ ability to transact with them
Ultimately, gold trades in a widely authorised and regulated market with transparency.
Gold demand is diverse, coming from jewellery, investment, technology and central banks
Cryptocurrency demand is highly speculative or investment related, as there is little proof of its use as a medium of exchange
Gold has a track record dating back to 600 BC, whereas bitcoin has only a 10-year track record.
The stock of both bitcoin and gold tends to grow in the low single digits; both have finite amounts of supply
However, there is nothing to prevent an enhanced cryptocurrency from being launched, devaluing those already in existence.
Gold is a well understood investment tool in portfolios as it:
has been a source of returns rivaling the stock market over the long-term
protects against inflation
is a portfolio diversifier, useful during downturns in the market
trades in a liquid market.
Cryptocurrency performance has been remarkable over the long-term but has seen massive haircuts during some periods and has failed during periods when it should have thrived. Cryptocurrency has:
failed as a hedge in late 2018, behaving like a risk asset, down on par with technology stocks, falling 55% in the fourth quarter. Gold was up 9% over the same period
developed into a highly volatile investment as timing is vital
scarce liquidity and non-transparent pricing.
We continue to acknowledge the innovation taking place in the cryptocurrency and blockchain spaces and believe there will be a role for this technology in the future. However, it is clear that cryptocurrencies are not a replacement for gold and gold should remain a component in all investment portfolios.
Disclaimer: This information does not purport to make any recommendations or provide any investment or other advice with respect to the purchase, sale or other disposition of gold, any gold related products or any other products, securities or investments, including without limitation, any advice to the effect that any gold related transaction is appropriate for any investment objective or financial situation of a prospective investor.