Safe-haven assets are on the rise amid concerns over a widening coronavirus outbreak. Meanwhile, bitcoin collapsed over the weekend as investors begin to question its ability to act as a hedge, Cryptoslate reported.
Gold prices surged above $1,700 per ounce as investors took a flight to safety worldwide. The precious metal hit the highest it has been in more than seven years, showing immunity to the coronavirus, which has injected fear across all the major global economies.
Michael McCarthy, the chief market strategist at CMC Markets, explained: “There’s a clear rush to safe-haven assets at the moment and gold’s a major beneficiary. [Markets are concerned that] we could see a more ugly situation before things get better, which of course is good news for gold.”
The state of commotion in the global financial markets led Goldman Sachs Group to raise its 12-month forecast for gold by $200. The bank affirmed that in the event that the coronavirus effect spreads to the second quarter of the year, gold could climb to $1,800 per ounce on a three-month basis.
Spot gold surged as much as 8.2% since the beginning of the month. It recently hit a high of $1,703.60 an ounce. In the meantime, bitcoin, which is seen by many as a “digital gold” safe-haven, took a 12% nosedive.
The flagship cryptocurrency moved below the $8,000 level for the first time since January. It went down to hit a low of $7,730 over the weekend.
Bitcoin’s failure to rally on the most ideal financial circumstances was a clear sign that a steep decline was coming, according to the CEO of Euro Pacific Capital, Peter Schiff.
Along the same lines, Nobel-winning economist Nouriel Roubini suggested that the poor performance that BTC has had during this global epidemic obliterates the notion that it can act as a hedging asset during times of financial turmoil.
Roubini said: “Bitcoin is down 8% in the last day, much more than global equities. Another proof that bitcoin is NOT a good hedge vs risky assets in risk-off episodes. It actually falls more than risky assets during risk-off. So BTC is a shitty shitcoin hedge in risk-off cases.”
With eight new countries including Bulgaria, Costa Rica, Faeroe Islands, French Guiana, Maldives, Malta, Martinique, and Republic of Moldova reporting their first cases of coronavirus, investors tremble in “extreme fear” of a further downturn in the cryptocurrency market.
Although fear can be seen as a positive sign according to the Crypto Fear and Greed Index, technical analysts Michaël van de Poppe maintains that bitcoin could still drop to $7,350.
At the time of publication (7.45 pm Hong Kong time), the price of bitcoin was US$7,825, according to CoinMarketCap.