Is Gold’s Position as a Safe Haven Asset Slipping in Favour of Bitcoin?


Global demand for gold appears to be dropping according to figures published by the World Gold Council earlier today. The asset had its weakest opening quarter since the global financial crisis of 2008.

Is Bitcoin Filling the Same Niche as Gold?

According to CNBC, worldwide demand for gold was down seven percent year-on-year for the first quarter of 2018. The WGC apparently blamed the drop on around a 15 percent decrease in investment in gold bars. Alistair Hewitt, the head of market intelligence at the trade group commented on the drop in demand:

“Relatively solid global economic growth, coupled with the return of volatility in the capital markets in February, created a stable environment for gold in (the first quarter).”

Gold is an asset that has traditionally been seen as a safe haven during times of global turmoil. This was particularly evident in the first three months of 2017 when heightened political uncertainty saw the price of gold rise. Despite what Hewitt refers to as ‘relatively solid global economic growth’ there is still great uncertainty around the world. For example, troubles surrounding U.S. military operations in Syria are consistently portrayed in the media as a certain precursor to an imminent global conflict. Yet still the price of gold seems stable.

Could this be down to another asset fulfilling the same niche that humanity has carved for gold over the course of thousands of years?

Bitcoin seems to represent almost all that gold ever did and more. It’s scarce and in a known quantity – space exploration isn’t suddenly going to flood the market with Bitcoin in the future. It’s also easier to store, easier to transfer, and completely unconfiscatable (when secured correctly). The only thing it lacks to fulfil the properties of a store of value is historical precedent.

The likes of Peter Schiff scoff at Bitcoin because its value is only determined by supply and demand along with a psychological drive to hoard it. Isn’t this the same as any asset though? If suddenly the whole planet decided that the U.S. dollar was worthless, its perceived value would crash. The same would happen with gold. Value itself is social construct. Non-human primates don’t hoard gold, dollars, Bitcoin, or any other asset for that matter. If the proverbial really did hit the fan, the ‘value’ of all these assets would crash whilst people instead stockpiled ammunition, weapons, and food.

Evidence is growing that more people are rejecting the traditional safe haven of gold in favour of Bitcoin. Christopher Giancarlo of the U.S. Commodity Futures Trading Commission (CFTC) recently claimed that global fascination with Bitcoin was the result of a generation losing faith in those that created the global financial crisis of ten years ago. Other reports suggest that younger people who have grown up in a digital world understand Bitcoin in a way the generation before them doesn’t. This seems rational given that surveys by Blockchain Capital last year suggested that millennials were increasingly favouring Bitcoin over gold.

Could the current slump reported by the WGC in the price of gold be down to a greater understanding of what Bitcoin represents – freedom to store value without government intrusion? It’s much too early to tell for sure but it’ll certainly be an interesting trend to watch in the coming years.