Recently, the trends of gold and "digital gold" Bitcoin have attracted global attention.

After a significant correction of nearly 10%, gold prices have rebounded for five consecutive days for the first time since March, returning above the 50-day moving average ($2,664). The unexpected escalation of geopolitical conflicts has accelerated the recovery of gold prices. Although many believe that a strong dollar, high inflation, and anti-war sentiments may dampen the enthusiasm for gold, Wall Street giants are calling for "buying on dips," with Goldman Sachs recently stating that gold prices are still supported by central bank demand for gold purchases and expectations of interest rate cuts, maintaining its forecast for gold prices to reach $3,000 by December 2025.

Similarly impressive is Bitcoin. Bitcoin has surged close to $98,000, on the verge of breaking through the $100,000 mark, with a year-to-date increase approaching 130%. He criticized Gensler's regulatory policies towards the cryptocurrency industry as being too tough, stifling the potential for the United States to innovate in cryptocurrency technology and harming the country's global competitiveness. However, traders who have been pouring into Bitcoin ETFs and BITX (double long Bitcoin ETF) in recent months have started to take profits. A senior miner stated: "This year, miners are reluctant to sell, and Bitcoin halving occurs approximately every four years. Halving reduces the supply of new Bitcoin in the market. Although everyone expects the $100,000 mark to be just a matter of time, after the surge, there is still a tendency to take profits first and then observe the situation after the inauguration in January."

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Institutional buying on gold dips

In the first week of November, gold prices first set a historical high at the beginning of the month and then began to decline. The spot price of gold once fell from a record high near $2,800 to the $2,500 range, with a short-term drop approaching 10%. This is also one of the largest declines in recent years.

The World Gold Council told reporters that the association's Gold Price Performance Attribution Model (GRAM) shows that the reasons for the decline in gold prices mainly include the following aspects: the strengthening of the US dollar; gold price lag and other momentum factors; outflows from gold ETFs; and a decrease in net long positions of managed funds on the New York Mercantile Exchange (COMEX) due to the possible liquidation of hedge positions.

In the first week of November, global gold ETFs are estimated to have outflowed about $809 million (12 tons). Among them, the outflow in North America was the largest, fortunately, strong inflows in Asia offset part of the outflow. This may indicate that concerns about the re-ignition of trade disputes between China and the United States are heating up again. In addition, net positions on COMEX also decreased by 8% (74 tons) compared to the previous week.

"The result objectively suppresses the upward momentum of gold so far this year. The reasons may include the following: the continued strengthening of bond yields and the US dollar, the increase in risk preference in the stock market, the boom in cryptocurrencies, and the easing of geopolitical tensions. These factors may cause the gold rally to press the pause button that the market is eagerly awaiting, or even usher in a healthy short-term correction," the World Gold Council said.

However, many overseas investment banks and asset managers tend to buy on dips, and they generally believe that $2,400 and $2,500 may be the lowest point of the correction.

People do not believe that various risks in the future will decrease significantly. Goldman Sachs believes that the role of commodities in investment portfolios is becoming more diversified, especially long positions in gold and crude oil, which can be key inflation and geopolitical hedge tools in tail risk scenarios, including tariff escalation (gold), geopolitically caused oil supply disruptions (crude oil and possibly gold), and debt concerns (gold).

UBS also mentioned in its New Year outlook that the gold trend has slowed down but remains a winner. The demand for gold from central banks and the retail market remains strong because they want to diversify their investment portfolios. Even if the gold trend slows down, it will still be a winner among commodities, and investors' enthusiasm for copper will be dragged down by weak economic growth.

Although the US dollar index has recently approached the 108 mark, the World Gold Council believes that recently, the impact of US Treasury yields and the US dollar trend on gold prices has become smaller and smaller. Most of the returns on gold in October and most of 2024 were generated during trading hours in the Asian region. Some of the buying may be related to "sanction" measures, but central bank gold purchases have slowed down in the third quarter, so it may also be driven by investors. Currently, tariff policies may bring more pressure on Asian stock markets, which is a major factor for Chinese investors to maintain strong demand for Chinese gold investments this year.

In addition, the Republican Party's fiscal policy is likely to cause inflation: measures such as increasing tariffs, dealing with immigration, tax cuts, and reducing borrowing costs may all affect inflation data. At the same time, excessive fiscal deficits will continue to put pressure on the credit of US Treasury bonds, and concerns about fiat currency are beneficial to gold.

Retail profits before Bitcoin crosses the 100,000 mark

Bitcoin's rise is far more spectacular than gold, but the violent fluctuations have also led speculators or traders to start leaning towards taking profits. After all, Bitcoin, which was in the $70,000 range at the beginning of November, has already rushed towards the $100,000 mark.

"Bitcoin halving occurs approximately every four years, which is an event where the reward for miners to verify transactions is reduced by 50%. Halving reduces the supply of new Bitcoin in the market, thereby increasing the scarcity of Bitcoin. If other market conditions remain unchanged, this will usually drive up the price. This year, Bitcoin has ushered in a significant positive for halving. A relaxed attitude towards cryptocurrencies is a positive for the market," the aforementioned miner said.

He also mentioned that the decline in Bitcoin's bear market is gradually narrowing, indicating that the market is gradually maturing. For example, the decline in the 2011 bear market was -93%, in 2015 it was -85%, in 2018 it was -86%, and in 2022 it was -76%. In addition, the rebound of Bitcoin after halving has also begun to narrow, with a current rebound of 42%, lower than the 53.3% and 122.5% after the previous two halvings. Reduced volatility is a manifestation of the market gradually maturing and the proportion of long-term investors increasing.

Nevertheless, this can never cover up the fact that the cryptocurrency circle is prone to extreme speculation, and policy expectations are the leading factors driving this wave of currency market trends. For example, the market expects that the government may adopt more friendly cryptocurrency policies, such as establishing digital asset policy positions and formulating cryptocurrency regulatory frameworks.

"The current price is about $99,000, but there may be a potential decline of up to $30,000 within a month. Investors need to carefully assess the risks," the aforementioned miner said.

Coincidentally, Matt Weller, head of global research at Garson Group, told reporters that the cryptocurrency "fear and greed" index reached 94, which is "extremely greedy", basically the highest level ever.

Another way to measure sentiment is based on the inflow of funds into exchange-based cryptocurrency investment tools, which has remained near record highs last week. As of last Friday, Bitcoin ETFs alone had nearly $3 billion in huge inflows in just the past four days. In the long term, the inflow of funds from "traditional finance" investors has provided incremental demand for Bitcoin, helping to support Bitcoin prices.

Will Bitcoin's attempt to break through the $100,000 mark be a profit-taking area or a stepping stone to above $120,000? At least for now, more people choose to take profits and wait and see.

"After consolidating around $90,000 for a week, Bitcoin ushered in a retaliatory breakthrough in the middle of last week, rising to a high above $99,000. At this time, momentum and sentiment are very bullish, but it is worth thinking about whether the upcoming resistance levels of $100,000 (psychologically important integer position) or $102,000 (161.8% Fibonacci extension of the 2021-2022 pullback) will trigger a round of profit-taking, especially when the RSI shows potential bearish divergence, but we need price reversal to confirm the signal," Weller said.

Anyway, although Bitcoin faces positive factors such as halving and policy benefits, the market's fluctuation cycle has narrowed compared to the past, meaning that gains and losses may be faster and deeper. In addition, a significant breakthrough from a long consolidation period often exceeds expectations, so traders may need to be cautious about any contrarian trades.