Gold climbing to new record highs bodes well for the price of Bitcoin
Gold prices increased by 3% from May 29 to June 2, reaching a three-week high, while Bitcoin remains above $105,000. The US Dollar Index (DXY) fell to a six-week low, indicating reduced confidence in the Federal Reserve's monetary policy and concerns about US government debt sustainability. Treasury Secretary Scott Bessent assured that the US will not default, despite rising debt ceiling proposals. A weaker DXY may drive investors to seek returns outside the dollar. The US government, as the largest gold holder, could sell reserves to improve fiscal health, but this would only marginally address the federal deficit. In contrast, investing $171.8 billion in Bitcoin could enhance US dominance in the asset. Despite being the largest gold holder, the US ranks low in gold production. Recent data shows net outflows from gold ETFs and $3 billion inflows into Bitcoin ETFs, reflecting diminished confidence in gold's short-term prospects. Gold's market cap stands at $22.7 trillion, while Bitcoin's is $2.1 trillion, indicating potential for growth amid concerns over US fiscal stability.
