Investors flee gold for cryptocurrencies because inflation worries increase

investors throw gold for cryptocurrencies while inflation attracts and flee from a metal that is historically advertised as a value -plot to buy digital assets that are hardly more than a decade old.

According to Bloomberg data, more than 10 billion was this year. This year the gold price fell by 6.1 percent to $ 1,782 per troy ounce on Wednesday.

Bitcoin has now doubled to a record high of more than $ 67,000 this week. Some investors have started to consider them and other cryptocurrencies than inflation protection, even if there were none during the last serious inflation boost.

Experienced gold dealers know that times are changing. "At the moment there is no interest in our strategy," said John Hathaway, Senior Portfolio Manager at Sprott Asset Management, a precious metal investment group. He added: "The Bitcoin crowd sees the same things that I see in terms of inflation risks when printing money."

gold has long been advertised as protection against the reduced purchasing power of Fiat currencies such as the dollar. Needing, suffocated goods supplies and incentives of the central banks have revived inflation concerns, which normally supported the gold markets.

The wisdom obtained does not take place on the financial markets. The dollar has strengthened with the US economy and the gold price has fallen, with investors looking for protection elsewhere.

"There is now a tendency to consider Bitcoin as a portfolio diversifier, with inflation being one of the catalysts," said Mohamed el-erian, president of the Queens' College, Cambridge and chief economic consultant of the Allianz. "Bitcoin has pulled money away from gold."

Paul Tudor Jones, the hedge fund manager, told CNBC on Wednesday that he preferred cryptocurrencies as inflation protection against gold.

According to the latest Institutional Investor Digital Assets Study from Fidelity, in which 1,100 professional investors were interviewed, the lack of correlation of Bitcoin with other asset classes and the perceived potential for securing inflation contributed to its popularity in the mainstream.

More than half of the hedge funds surveyed in Europe and the USA stated that increasing inflation was a main reason for its attraction on digital assets, with almost eight out of ten of the investors surveyed to provide that cryptocurrencies have a place in one portfolio

"Institutional investors seem to return to Bitcoin and may see it as better protection against inflation than gold," said JPMorgan analysts this month.

Bitcoin was introduced in 2009 while gold has been traded for thousands of years. Fans of cryptocurrency say that their benefits as a protection against inflation from their design, which limits the maximum number of digital coins to 21 million. This is contrary to the money pressure measures that the central banks have taken in response to pandemic.

Some gold investors say that the fate of the raw material could change if inflation should last, which undermines trust in the mantra of the Federal Reserve, that increasing prices are temporary and require more drastic tightening of monetary policy.

They also pointed out the short performance history and the price volatility of Bitcoin, which undermined its reliability as inflation protection.

"If my reservations prove to be correct, I think that gold is prepared for a significant increase," said Hathaway by Sprott Asset Management.