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Bitcoin is surging as an inflation hedge, but don't count out gold either

March 2, 2021. Summarized by summa-bot.

Compression ratio: 47.1%. 2 min read.

Inflation concerns have led to more volatility in the stock and bond markets of late. That should be good news for gold, a tangible asset with a limited supply that often does well in times of inflation. Central banks can always print more money. Miners can't just magically create more gold.

That should be good news for gold, a tangible asset with a limited supply that often does well in times of inflation.

Still, fans of gold think the yellow metal is due for a rebound — even if bitcoin continues to march higher as well.

But gold also does well when investors are worried about inflation — as they are now.

"Investors need a serious hedge against inflation, and bitcoin may not offer that," said Ipek Ozkardeskaya, senior analyst with Swissquote, in a recent report.

"The reason that we see higher gold prices is also mainly because the US House passed the stimulus package.

They argue that investors need to "stay vigilant" and get ahead of this inflation scenario and that buying gold is one way to do so.

Analysts from UBS Global Wealth Management also said in a report Tuesday that the recent pullback in gold looked "overdone" and that —"spikes in market uncertainties. . . could offer support in the short run. "

But bitcoin may be beating gold for good reason

Still, a gold rebound doesn't have to coincide with a bitcoin pullback.

"Gold is good for slightly higher inflation but not necessarily much higher real interest rates," said Brad Neuman, director of market strategy at Alger, in an interview with CNN Business.

Neuman said that although inflation is often accompanied by rising rates, the problem is that rates can spike dramatically and hurt the returns on gold.

As such, Neuman thinks bitcoin — as well as crypto-related companies such as PayPal (PYPL), which now allows users to trade and hold bitcoin on the platform — could be even better bets than gold.

Bitcoin backers also point out that the cryptocurrency likely will remain popular with investors who view it as a store of value during times of inflation — just like gold.

The biggest reason bitcoin has surged this year probably has more to do with the fact that investors have come to recognize that the cryptocurrency is even more scarce than gold or other precious metals.

Most consumers are unlikely to use gold or bitcoin to actually buy anything, but both assets could wind up being investment winners at a time when consumer prices are rising.

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