$7 billion flows into gold and Bitcoin in 5 sessions

Gold-linked and Bitcoin-linked exchange-traded funds (ETFs) attracted record inflows of $7 billion over the last five trading sessions, signaling a growing investor shift toward alternative assets to hedge against a weakening US dollar and concerns related to rising US government debt, the trajectory of interest rates, and long-term yields.

Gold and Bitcoin funds captured a significant share of this liquidity. The GLD gold ETF attracted approximately $3.4 billion, while the IBIT fund, managed by BlackRock and invested in Bitcoin, saw inflows of around $1.5 billion.

These flows reflect a return to what markets call the “currency debasement trade,” an investment strategy designed to hedge against the potential erosion of currency purchasing power driven by rising government debt and more accommodative fiscal and monetary policies. This is achieved by increasing exposure to assets with limited supply, primarily gold and Bitcoin.

This renewed interest coincided with a strong surge in Bitcoin, which rose approximately 22% last week, posting its largest gains in three days since 2023. Bitcoin reclaimed trading above its 200-day moving average at around $69,050, a move analysts believe may extend beyond a mere temporary price rebound.

The rally was supported by a shift in macro-market sentiment that drew investors back to alternative assets, alongside short covering. Institutional inflows added further momentum, as spot Bitcoin ETFs attracted approximately $1.6 billion last week. This suggests the upward wave was not driven solely by short squeezes resulting from forced position closures.

In parallel with Bitcoin’s renewed momentum, global banks have continued to raise their gold price forecasts. Geopolitical risks, inflation, and US monetary policy remain the top factors influencing the precious metal’s movements.

Citibank raised its gold price target for the next three months to $4,800 per ounce, while maintaining its 6-to-12-month target at $5,000 per ounce, citing continued supportive factors for the yellow metal. The bank believes the gold rally still has room to run, supported by expectations of falling real interest rates, a shift toward a less hawkish stance by the Federal Reserve, and the potential for a medium-term de-escalation of tensions related to the Strait of Hormuz.

Meanwhile, JPMorgan expects gold to trade in a range between $4,500 and $5,000 per ounce, with US inflation data and the Jackson Hole meetings identified as key market drivers.

Bitcoin surpassed the $80,000 level during Thursday’s trading, continuing a strong recovery wave in the cryptocurrency market over recent days. This occurred amid improved investor risk appetite and a return of investment flows into exchange-traded Bitcoin funds. The world’s largest cryptocurrency broke through the $80,000 mark before consolidating near that level, extending a rally that pushed weekly gains above 20%, amid signs of a strong return of institutional demand.

The yellow metal continues its upward trajectory, with monthly gains jumping 14%. Gold prices rose above $4,600 per ounce, recovering most of the previous session’s losses. Investors are now turning their attention to Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium today (Friday), seeking signals regarding the central bank’s approach to inflation and the path of interest rates.

The precious metal rose as much as 1.1% during yesterday’s trading, reaching $4,639.45 per ounce, before prices later retreated, as gold prices are on track to post gains of around 14% in August, bolstered by fresh momentum following the unexpected intervention by the US Treasury in the bond market last week.

Gold’s rise came after it ended a five-day winning streak on Wednesday, following data showing that US inflation remained at levels well above the Federal Reserve’s target, thereby strengthening the likelihood of a central bank interest rate hike. The dollar jumped at its fastest pace in two weeks following the data release, while yields on US Treasury bonds also rose.