Inverse Relationship Between Gold And Bitcoin Continues To Widen

Reynaldo Marquez

1 year ago

3 mins read

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Bitcoin was trading north of the $40,000 levels, as it managed to break above key resistance. The first cryptocurrency by market cap sits at $45,044, at the time of writing, with small losses after a strong rally pushed it high from the lows at $30,000.

Bitcoin BTC BTCUSD — BTC with minor losses in the 24-hour chart. Source: BTCUSD Tradingview

Bitcoin and the crypto market have been negatively reacting to the events coming from Washington as the Senates approved the infrastructure bill without the amendments to exclude certain entities from tax requirements. The fight will continue in other government institutions.

Our effort to get a vote on a digital asset fix failed because other senators refused to set aside their disagreements to support something they could actually agree on. Thanks @SenToomey for explaining this at the end of our effort on the floor.https://t.co/Lok8EWK1Eb

— Senator Cynthia Lummis (@SenLummis) August 9, 2021

Despite the news, BTC has held support at its current levels. In the meantime, other commodities as taken a turn to the downside. After a major rally during March and May 2021, Gold (XAU) fell from $1,800 to its current price at $1,731 strengthen the theory that there is an inverse correlation between the precious metal and Bitcoin.

BTC BTCUSD — Gold on a downtrend in the daily chart. Source: XAUUSD Tradingview

Trader Adam Mancini believes Gold crashed after it failed to clear its 200 daily moving average (DMA) and losing support north of $1,830. Mancini expects the precious metal to hold support at $1,745 or it risked to dropped further to $1,690. The critical area to watch for the bulls stands at $1,795. The trader added:

If $1690 fails from here its a long way down to $1575 next major support. As posted bulls will need to recapture some levels to confirm a bottom. $1750 a good start, but getting back above $1770 would be massively bullish now and trigger a new leg higher.

Mancini noted that Gold has been showing signs of weakness as Bitcoin rallied from the bottom of its previous range. However, the trader doesn’t rule out a break in the inverse correlation as both assets are showing signs of possible future appreciation. He added:

Bitcoin $BTCUSD is waking up. Technicals suggest rally is young. Key pattern is a rising channel from Sept 2020 which held at 29k. Likely path is 54-55k next, good pullback, then 75k channel resistance. 29k *must* hold

Bitcoin Rises As Gold Experiences One Of Its Worst Periods To Date

Arcane Research recently published a report supporting the inverse correlation between BTC and Gold. The precious metal has been “compounding losses” already accumulated in previous days with a major sell-off in the derivatives sector.

Around 24,000 Gold futures contracts were sold in a short span of time during the Asian trading session, Arcane Research added. This constituted Gold’s “fastest and second-biggest nominal drop ever”. The macro-economic outlook seems to be contributing to the price action on both assets.

Some speculate that the soon-to-be-published report by the U.S. on inflation, the measure by the Consumer Price Index (CPI), could “encourage a reduction in stimulus by the FED”. The lower the inflation expectations, the fewer investors feel the need to use Bitcoin and Gold as a hedge.

Senior Commodity Analyst for Bloomberg Intelligence Mike McGlone claimed that Bitcoin and gold could face a threat precisely from a macroeconomic event. In the meantime, McGlone believes BTC and XAU could “advance together” as digital and analog stores of value. The expert added:

Resurfacing deflationary forces indicated by declining U.S. Treasury bond yields and peaking commodities add underpinnings to gold and Bitcoin.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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