Asset classes of 2021: Bitcoin’s surge leaves gold in the dust

Asset classes of 2021: Bitcoin’s surge leaves gold in the dust

Gold is among the worst-performing major asset classes of 2021 despite accelerating inflation, as the precious metal’s lustre has faded next to what some see as its digital equivalent, bitcoin.

The precious metal, often hailed as an inflation hedge, has dropped 5 per cent this year, even with investors looking for protectionas consumer prices soar across the globe. Bitcoin, by contrast, has posted a big, if volatile, rally in 2021, with a 65 per cent appreciation in the year to date.

Francisco Blanch, strategist at Bank of America, said that the Federal Reserve’s withdrawal from crisis-era stimulus measures and higher bond yields in the US had caused “big headwinds” for gold. A stronger dollar, which makes the metal more expensive to international investors, had also weighed on its performance, he said.

“Some flows that may have historically gone to gold may have gone to crypto assets,” added Blanch. Digital assets allocation from institutional investors had risen “across the board” in the past year-and-half, he said.

Bitcoin enthusiasts see what they call “digital gold” as a bulwark against inflation, pointing to its finite supply. However, cryptocurrencies such as bitcoin and ethereum were more akin to “risk assets” than havens, said Blanch, who described them as