In times of economic stagnation and financial instability, like these, both Bitcoin and gold are labelled as safe-haven assets, a hedge against financial risks. However, while the demand for gold has historically increased during uncertain times, we don’t have sufficient data to say the same about Bitcoin.
The first evidence which can be observed is that since its inception, the Bitcoin price has significantly outperformed that of gold. But, coming back to our initial question, are Bitcoin and gold correlated? Cryptocurrency trader @thrillmex stated that a bearish argument for Bitcoin is found by looking at the patterns of Bitcoin and gold, outlining a bearish fractal.
Let’s observe them more closely and see if a correlation arises, according to @thrillmex ‘s analysis.
As for gold, “the support line for the price stretches out for most of 2011-2013. The price made a lower high before eventually breaking down. After the breakdown, there was a bearish cross of the 50- and 100-week moving averages. This indicated that the upward trend has lost its power and a downward trend has begun. Additionally, the RSI was heavily oversold and the lack of divergence reduced the possibility of a reversal.”
The pattern for Bitcoin looks similar, “besides the fact that it is transpiring within a shorter time-frame. After hitting a lower high, the BTC price broke down and, afterward, validated the support line. However, it was above the MAs during the whole period and found support above them after the breakdown. Additionally, the RSI is in neutral territory and is moving upward.”
The conclusion we can draw can be the following: despite the pattern similarities, we do not observe any other resemblance between the prices of Bitcoin and gold over the same timeframe. This makes us conclude that we cannot use the price of Bitcoin to predict changes in the price of gold, and viceversa. In other words, there is no a strong correlation between the two prices. As a consequence, a trader should not pay much attention to gold behavior when it has to invest in Bitcoin.