Gold and bitcoin price surges: This is the rally of fear not euphoria

The price of gold has climbed to a record high of more than $4,000 an ounce as investors look for safe havens amid deepening political and economic uncertainty across the world.

Bitcoin, too, is at uncharted heights, trading above $125,000 for the first time. The world’s largest cryptocurrency has doubled in value over the past year, supported initially by Donald Trump’s return to the White House, and more recently by fears over the US government shutdown.

Analysts said that the standoff in Washington has weakened confidence in the dollar, pushing investors toward alternative assets, reported Sky news. Max Shannon, senior associate at Bitwise, noted that stubbornly high inflation, which continues to erode purchasing power, is also driving the shift.

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Several governments have expanded their monetary supply amid rising borrowing, effectively reducing the value of cash in circulation. This has triggered what market watchers call a “debasement trade”, where investors move their funds into “hard” assets such as gold and Bitcoin to preserve value.

Why is this the rally of fear?

Investors have been piling into what is sometimes called the “debasement trade,” pouring money into assets seen as hedges against their biggest concerns, including persistently high government debt and threats to central bank independence, while turning away from what was once viewed as the safest haven: the US dollar.
This shift has propelled gold and its digital counterpart bitcoin to record highs. The SPDR Gold ETF (GLD) and, to a lesser extent, the iShares Bitcoin Trust ETF (IBIT) have been rising throughout the year, even as the US dollar index (DXY) has steadily declined.
Investors are hedging their bets against dollar dominance in a “really concerning” development, driving up the prices of gold and crypto assets, according to Citadel’s Ken Griffin.
“We’re seeing substantial asset inflation away from the dollar as people are looking for ways to effectively de-dollarize or de-risk their portfolios vis-a-vis U.S. sovereign risk,” he recently told Bloomberg.

Gold’s record run and the safe-haven rush

Gold is witnessing its strongest rally since the 1970s, with prices up by nearly a third since April when President Trump’s new tariffs disrupted global trade flows. On Wednesday afternoon in Asia, spot gold, the real-time market value for immediate delivery, hit $4,036 an ounce. Gold futures, a measure of investor sentiment, reached the same level on 7 October.

According to Christopher Wong, rates strategist at Singapore’s OCBC Bank, the ongoing US government shutdown has provided a “tailwind for gold prices.” Historically, investors have turned to gold during such periods of political paralysis, the metal rose nearly 4% during the month-long shutdown in Trump’s first term. However, Wong cautioned that prices could retreat if the current standoff ends sooner than anticipated.

Heng Koon How, head of markets strategy at UOB Bank, described gold’s recent surge as “unprecedented”, noting that it has outpaced analysts’ forecasts. He linked the rise to both a weakening dollar and increased buying by retail investors.

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Not all gold investors hold the metal itself. Many are opting for exchange-traded funds (ETFs) backed by gold. The World Gold Council reports a record $64bn has been invested in gold ETFs so far this year, another sign of the growing rush toward perceived safety.

Meanwhile, analysts warn that delays to key economic data releases caused by the US government shutdown are adding to investor anxiety, further fuelling the flight to scarce assets.