Gold prices rise on weaker dollar, Fed easing bets; holds long-term appeal
Investing.com -- BCA Research believes both gold and Bitcoin will deliver strong long-term returns, but the digital asset is likely to outperform as investors increasingly rotate from physical into digital stores of value.
After a 10% pullback following this year’s sharp rally, BCA strategists said the correction in gold is “mostly behind us,” while maintaining that its long-term appeal remains intact.
“The network effect that has made gold the physical insurance asset of choice will generate long-term outperformance versus other commodities,” a team led by Dhaval Joshi wrote in a report released Thursday.
Gold’s value, they said, stems from its role as an “insurance asset” in the fiat money system—a function reinforced by collective investor belief and central bank behavior.
“The true value of gold comes from the network effect that makes gold the go-to insurance asset in a fiat monetary regime,” the strategists said.
The research house identified three main drivers of gold’s long-term value: global wealth levels, the share of wealth allocated to insurance assets, and the availability of alternatives.
Bitcoin, it said, has emerged as a new contender for the third factor. The value of Bitcoin, also referred to as “digital gold,” also arises from a network effect that makes it the preferred “digital insurance asset,” strategists noted.
With Bitcoin’s market capitalization around $2 trillion versus roughly $30 trillion for gold, BCA expects “substantially more long-term upside” for the cryptocurrency as investors migrate toward digital assets.
“Long-term investors should also own Bitcoin,” the team said, adding that its rising share of the insurance-asset market gives it “three long-term tailwinds” compared with gold’s two.