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In what they characterize as the “debasement trade,” analysts at J.P. Morgan believe that rising geopolitical tensions and November’s presidential election are guiding investors towards gold and bitcoin as safe-haven investments.
“Rising geopolitical tensions and the coming U.S. election are likely to reinforce what some investors call the ‘debasement trade’ so favoring both gold and bitcoin,” J.P. Morgan Global Markets Strategy analysts Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole, and Krutik P. Mehta said in a note on Thursday.
Although gold first reacted more subduedly to current geopolitical events, its price has surged over the previous quarter, and on Sept. 26, it approaches the $2,700 milestone, the analysts noted.
“This increase in gold prices is influenced by a 4-5% decline in the dollar and a significant drop in real U.S. Treasury yields by 50-80 basis points. However, the appreciation of gold has exceeded what these factors alone would suggest, indicating a re-emergence of the ‘debasement trade,’” the analysts stated.
Thursday’s note said that a mix of elements drives this “debasement trade”: rising geopolitical uncertainty since 2022, ongoing inflation worries, large government deficits in key economies, and declining confidence in fiat currencies, especially in some emerging markets.
A recent CryptoQuant article on X reflected similar ideas, stressing past events whereby declining U.S. Treasury yields resulted in increased gold prices.
“In 2008, as the 13-week Treasury Bill yields sank, gold prices surged from $590 to a peak of $1,900 per ounce by 2011,” the piece claimed. “A similar trend is emerging now, with gold climbing from $2,000 to nearly $2,700. Bitcoin, often seen as ‘digital gold,’ may follow this pattern.”
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