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As Investors Worry About Pricey Gold, Correlation with Bitcoin Falls

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With gold bulls seemingly on every corner, a recent survey from Bank of America has found that professional money managers now increasingly worry that the metal is becoming overvalued, even after a correction in prices from its all-time highs. Meanwhile, the realized correlation between bitcoin (BTC) and gold has fallen again, after recently hitting its highest level in a year.

Source: Adobe / Max

According to a Bank of America’s monthly survey of professional fund managers, 31% of respondents now believe gold is overvalued – a figure that marks a sharp increase from 0% of respondents saying the same one month ago. It also found gold to be the second-most popular trade to be in, behind only US technology stocks, Yahoo Finance reported earlier this week.

Source: Bank of America, Yahoo Finance

And while the finding suggests that many professionals now see gold as on the expensive side, it did not deter Warren Buffet, arguably the world’s best-known investor and a long-time critic of gold, from taking a stake in gold mining giant Barrick Gold, as widely reported earlier this week.

Meanwhile, the so-called realized correlation between gold and bitcoin has recently fallen from its highest levels in a year, as gold prices have edged lower while bitcoin has remained largely stable and has even risen in price. According to data from Skew, the 1-month realized correlation is now at 32.7%, versus 67.5% on August 3.

Source: Skew

After reaching an all-time high of USD 2,075 on Friday August 7, gold prices took a hit last Tuesday as investors dumped the metal back down to the low USD 1,900 region again. Since then, the precious metal has largely consolidated below the USD 2,000 mark, struggling to break above the crucial level.

And while bitcoin is still a far cry from its all-time high, the asset has proven resilient recently, posting large gains in late July when gold prices also rallied, partly driven by a weaker dollar and fears of higher inflation in the US.

At 14:26 UTC, BTC was trading at USD 11,746. It dropped less than 1% in a day and went up less than 1% in a week.

Despite gold recently selling off, however, some analysts are still raising their target prices for the metal, with for example Global Equity Strategist at Credit Suisse, Andrew Garthwaite, writing in a note cited by Yahoo Finance that the bank still sees “plenty of upside on the gold price and view the correction as a buying opportunity.”

“We think policy stays loose (especially fiscal) until unemployment falls to much lower levels in the US, which this time around generates some inflation…,” Garthwaite further added in the note.


Learn more:
Buffet’s Gold Investment Triggers Schiff’s Attack on Bitcoin
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Gold Faces a Very Physical Problem; Bitcoin To the Rescue!