Bitcoin and gold both rallied over the weekend, with the yellow metal hitting a record intraday high on Sunday before pulling back and the digital asset hitting its highest level since April 2022 on Monday.
Both assets rallied on optimism that the Federal Reserve is done raising interest rates and could start cutting its benchmark interest rate as early as March next year, according to Mark Connors, director of research at digital asset management firm 3iQ.
Traders in Fed fund futures are pricing in more than a 50% chance that the US central bank will cut its benchmark rate by 25 basis points at its March meeting, according to the CME FedWatch tool. This is up from 21.5% a week ago.
The yield on the 10-year Treasury note BX:TMUBMUSD10Y has fallen sharply over the past month, down 39 basis points, despite a rise on Monday, according to FactSet data.
Lower Treasury rates are bullish for both gold GC00, 0.66% and bitcoin BTCUSD, -0.54%, said Greg Magadini, director of derivatives at Amberdata. As neither gold nor bitcoin are interest-bearing, high Treasury yields will make such assets less attractive.
Gold and bitcoin have often traded in tandem this year, including after the US banking mini-crisis in March and after the outbreak of the Israel-Hamas war in October, Magadini said.
Still, David Tawil, president and co-founder of digital asset fund ProChain Capital, said it could just be a coincidence that bitcoin and gold rallied around the same time.
Bitcoin’s rally is largely driven by optimism that the US Securities and Exchange Commission may soon approve an exchange-traded fund that invests directly in the crypto, rather than macroeconomic factors, according to Tawil.
He expects the crypto to continue its rally through the end of the year, reaching as high as $47,000 by the time a bitcoin ETF is approved.
For gold, it’s important to watch Friday’s US jobs report, said James Harte, analyst at Tickmill Group.
If the report comes in weaker than expected, it could put further pressure on the US dollar and allow gold to trade higher in the short term, and vice versa, Harte said.
Front-month gold futures GCZ23, +0.62% lost $46.90 a troy ounce, or 2.3%, to $2024.10 on Monday, according to Dow Jones market data. Bitcoin rose 5.5% over the past 24 hours to just under $41,900, according to CoinDesk data.
US stocks closed lower on Monday, with the Dow Jones Industrial Average DJIA down 0.1%. The S&P 500 SPX fell 0.5% and the Nasdaq Composite COMP fell 0.8%, according to FactSet data.
