As the stock market heads into the final stretch of the year and investors brace for another round of interest rate uncertainty, a big question is emerging: When markets get disrupted, what is the optimal safe harbor?
Two high-profile alternative investment options come to mind.
Gold is back its shine as prices flirt with $4,000 an ounce while Bitcoin, having just topped $100,000, tests whether digital scarcity can eclipse the world's oldest hedge. Both have moved in opposite directions at times and tell a deeper story about where anxious investors stash money in their portfolios when the traditional stock market pattern stops working.
Industry data confirms growing unrest on Wall Street. New research from Charles Schwab notes that while most traders remain bullish on stocks, 67% also say the market is overvalued (up 10 points from three months ago). Another 57% say that stagflationThe dire combination of slow economic growth and persistent inflation is “somewhat or very likely over the next 18 months,” the study says.
Here's what investors need to know.
Weighing the value of gold versus bitcoin
Continuous anxiety about the economy And stock market is giving a shot of adrenaline to both the gold and cryptocurrency markets as the benchmark S&P 500 index is down about 2% in five days.
That's where gold and Bitcoin are now.
Gold prices
As of the end of this week, gold prices were around $4,000 per troy ounce. Gold recently surpassed $4,000. before retreating moderately as commodity traders weigh the impact of the U.S. dollar, which is closely tied to gold prices, lingering inflation concerns and the Federal Reserve's response. Typically, gold acts as a hedge or “insurance” in times of uncertainty.
Bitcoin
Bitcoin, the world's most popular cryptocurrency, was trading at around $102,000 late this week after losing some ground in recent days. The cryptocurrency market is in a state of anticipation as investors weigh institutional ETF flows and some macroeconomic data such as monthly employment reportis disabled due to record government shutdown. Investment experts consider Bitcoin to be a more speculative, more volatile, “growth-oriented” risk asset, and you may want to allocate it differently depending on your risk tolerance.
“Both gold and bitcoin continue to gain traction, but for very different reasons,” said Eric Roach, a partner at Summit Metals in Park City, Utah. “Gold tends to trade uncorrelated with the market, where Bitcoin remains much more correlated with the Nasdaq (QQQ). While Bitcoin has a limited supply, like safe-haven assets, it trades and acts much more like a tech stock.”
What is the real difference?
IShares Bitcoin Trust (IBIT), a leading Bitcoin ETF, is 37% correlated with the Nasdaq-100 (or QQQ) and S&P 500. Gold is at 4%, meaning gold is the preferred alternative in the stock market. Additionally, the iShares Silver Trust ETF (SLV) is correlated 20% with the stock market and 74% with gold, making for a slightly more balanced portfolio play than pure gold.
“As conditions change relative to risk in risk trading, the proportion of investments in Bitcoin relative to gold will increase,” Roach said. “Similarly, if risk protection becomes your primary driver, then gold will remain on the sidelines with its extremely negative correlation to the stock market.”
Investors looking for a gold and bitcoin ETF strategy should consider two main factors: management costs and liquidity. “For gold investors, the GLD reserve ETF has performed very well, and for bitcoin, the IBIT ETF controls the lion's share of liquidity,” Roach noted.
Who performs better?
The data shows that safe-haven assets are clearly back in the spotlight as macroeconomic uncertainty and geopolitical tensions rise. However, the momentum between gold and cryptocurrencies has sharply split in recent weeks.
“Gold ETFs had one of their strongest months in years, with inflows exceeding $17 billion in September and a further $8.7 billion at the end of October,” said Nicholas Roberts-Huntley, CEO of Blueprint Finance. “This is a clear signal that institutional money is prioritizing stability and tangible hedges.”
Meanwhile, Bitcoin ETFs cooled, recording net outflows of $200 million on October 31 as traders took profits after a strong summer rally. “These pullbacks are often temporary consolidations rather than reversals,” Roberts-Huntley said. “Historically, BTC has risen strongly in the months following gold's peak inflows, so it would not be surprising to see capital flow back into digital assets by the end of the year.”
Is gold preference sustainable in the long term?
So what are the key performance indicators for gold and cryptocurrencies and what are ETF inflows telling the markets right now? In a word, it's all about emotions.
“We are seeing a clear short-term bias towards gold over bitcoin as investors de-risk and seek immediate safety, but it is too early to call this a lasting return to equities,” Roberts-Huntley said.
ETF flows, on the other hand, tell a more nuanced story.
“Gold is benefiting from fear while Bitcoin digests a period of profit-taking and positioning for the next macro environment, especially now that the Fed is in an easing cycle,” Roberts-Huntley added. “Historically, when gold inflows reach all-time highs, Bitcoin tends to underperform briefly before outperforming over the next 6-12 months. Today's divergence is not a rejection of the safe-haven cryptocurrency thesis, but rather a reflection of risk appetite catching up with monetary reality.”
The issue of Bitcoin and gold is complex and unique to each investor.
There is no one-size-fits-all approach to choosing between Bitcoin and gold as a protective portfolio hedge, as the choice largely depends on individual risk tolerance, investment horizon, and comfort with volatility.
“Gold has historically exhibited lower volatility and is often seen as a long-term stabilizer for portfolios,” said Shane Molidor, CEO of Forgd, a token advisory and optimization platform. “Bitcoin has delivered higher historical returns, but with significantly larger drawdowns.”
Some investors who are open to new asset classes and longer time horizons may consider investing in Bitcoin. “In contrast, others who are more focused on capital preservation tend to gravitate toward gold,” Molidor added.
