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Goldman Sachs expects gold to outperform bitcoin in the long term, according to a research note published on Monday. The bank cited several factors that could support the long-term outperformance of gold, including its exposure to real demand drivers, such as central bank monetary demand, safe-haven investments, and industrial applications.
Goldman Sachs noted that bitcoin's volatility to the downside has been enhanced by systemic concerns, such as the recent collapse of the Ftx exchange and the 3AC hedge fund. This has raised questions about the stability of the cryptocurrency market and has led some investors to question its long-term viability.
"Bitcoin’s volatility to the downside was also enhanced by systemic concerns as several large players filed for bankruptcy," it noted, reports Reuters.
Tighter liquidity will have a smaller impact on gold
In contrast, Goldman Sachs expects that tighter liquidity will have a smaller impact on gold, which is more exposed to real demand drivers.
The bank also believes that gold may benefit from structurally higher macro volatility and a growing need to diversify equity exposure. "Tighter liquidity should be a smaller drag on gold, which is more exposed to real demand drivers" like Asian consumer buying, central bank monetary demand, safe-haven investments, and industrial applications, it said.
"Moreover, gold may benefit from structurally higher macro volatility and a need to diversify equity exposure." Goldman Sachs's view on the relative merits of gold and bitcoin as investment assets is in contrast to the growing consensus among some investors that bitcoin is a superior investment.
These investors point to bitcoin's high returns and its increasing adoption by mainstream financial institutions as evidence of its long-term potential. However, Goldman Sachs's research note highlights some of the key risks associated with bitcoin, such as its high volatility and the potential for systemic failures within the cryptocurrency market.
These risks could make it difficult for bitcoin to achieve the long-term stability and sustainability that is required for it to be considered a viable investment asset. Ultimately, the debate about the relative merits of gold and bitcoin as investment assets is likely to continue for some time.
Both assets have their strengths and weaknesses, and the decision about which one to invest in will ultimately depend on an individual investor's risk appetite and investment objectives.