By: Fawad Razaqzada, Market Analyst
Gold has posted three consecutive weekly declines, and bitcoin has struggled in the same stretch, which is the clearest sign yet that the two assets are running on one engine rather than two. The dollar debasement trade, the bet that the U.S. dollar loses purchasing power over time, is the shared driver behind both, and it has stalled. Rising oil prices are keeping inflation concerns alive, pushing U.S. Treasury yields higher and making assets that pay no yield harder to justify holding. Consequently, what looks like two separate markets weakening is closer to one crowded position unwinding at the same time.
Fawad Razaqzada is a Market Analyst at StoneX Media with more than 12 years of trading and analysis experience across forex, indices, commodities and cryptocurrencies. He combines macroeconomics with technical analysis and price action, which is the ground where the U.S. dollar, bond yields, gold and digital assets meet.
Gold and bitcoin are not two independent hedges but two expressions of one position, a bet that the U.S. dollar is losing value. That framing matters because it changes what a trader is actually exposed to when holding both, namely the same currency risk twice rather than a diversified pair. When the U.S. dollar stops falling, the thesis that supports both assets loses its foundation at once, which is why weakness in gold and weakness in bitcoin tend to arrive together rather than in sequence. As Razaqzada puts it, "until the dollar debasement trade comes back or otherwise, the U.S. dollar starts falling again, the alternatives such as gold and bitcoin could remain under pressure".
Bond yields are the mechanism that turns U.S. dollar strength into sustained pressure on gold and bitcoin. According to Razaqzada, "higher yields increase the cost of holding a non-yielding asset, while a more resilient U.S. dollar provides a more direct headwind for gold", a combination he describes as the biggest macro headwind facing the metal. Gold carries a second disadvantage that bonds and cash do not, because holders also absorb storage and insurance costs on top of the income they forgo. Specifically, that means the hurdle rate for owning gold rises every time yields climb, regardless of what is happening to inflation or geopolitics. For anyone holding both gold and bitcoin as a debasement hedge, the result is that the cost of waiting for the thesis to work keeps increasing.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Fawad Razaqzada, StoneX Media Market Analyst
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