Gold Surges Past $4,000 as Bitcoin and Crypto Market Decline: A Look at the Day Ahead

As gold broke through the $4,000 per ounce barrier for the first time, bitcoin lost 1.25% of its value, while the broader crypto market dropped 3%, as measured by the CoinDesk 20 index. This decline occurred amid profit-taking after a 7.7% gain in the crypto market over the past week, coupled with increased paper gains among large investors. The US Dollar Index rose to its highest level in two months, contributing to the divergence. Gold, traditionally seen as a safe-haven asset, has rallied over 50% this year, with gold-linked ETF inflows accelerating to their highest levels since late 2022, according to ING. Investors are seeking refuge from rising political risks, including a new leadership crisis in France and growing tensions in Japan's fiscal policy direction. Meanwhile, the ongoing US government shutdown has delayed key economic data and added to concerns about its fiscal outlook. Bitcoin, often considered a hedge against uncertainty, has been impacted by the rising US dollar and short-term investors moving their BTC to exchanges to lock in profits. The sharp rise in Japanese government bond yields, which reached a 17-year high, has also contributed to bitcoin's challenges. However, institutional interest in Bitcoin remains, with US-listed spot ETFs adding over $3 billion in inflows last week, pushing total net inflows past $60 billion. This week, an additional $2 billion have been invested, per SoSoValue. Other notable developments include the launch of the Digital Markets 50 Index benchmark by S&P Global, which tracks 15 cryptocurrencies and 35 crypto-linked equities, and the Intercontinental Exchange's $2 billion investment in crypto-native predictions market Polymarket. According to Linh Tran, market analyst at XS.com, 'In the near term, Bitcoin's fundamental outlook remains positive, supported by monetary easing expectations, consistent ETF inflows, and persistent safe-haven demand.' The next test for the market could come from the Federal Reserve, with traders pricing in rate cuts. If the Fed confirms a shift toward easing, both gold and bitcoin could see renewed momentum.