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Bitcoin to Gold Correlation Rises, Physical Metal Buyers Pay Premium

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After seeing a decline for more than 3 months, the correlation between bitcoin (BTC) and gold is once again on the rise, with the sharpest increase seen in late July as gold, silver, and bitcoin have all soared higher in price. At the same time, investors are forced to pay premium over the spot prices for access to physical bullion.

Source: Adobe/Wit

According to data from Coin Metrics, the correlation between bitcoin, often referred to as digital gold, and the yellow metal is now back in positive territory, hovering around levels not seen since late April this year, after dipping into negative territory in June.

Source: Coin Metrics

The increase in correlation follows a surge in prices of bitcoin, as well as the two precious metals gold and silver in late July. Over the past two weeks since Friday, July 17, gold has now gained 9.5%, silver 23%, and bitcoin 21%, in what has been a two-week rally for all three assets.

Performance of gold (yellow line), silver (grey line), and bitcoin (blue line) over the past two weeks. Source: www.tradingview.com

The news of an increasing correlation between the traditional safe-haven metals and bitcoin also comes as the US Mint, which produces investment-grade gold & silver coins as well as circulating US coinage, last week announced that they have had to reduce the number of employees working per shift due to the COVID-19 pandemic.

And according to a Bloomberg report from this week, citing an internal document from the Mint, the reduction in on-site staff has also forced the government-owned entity to reduce the number of gold and silver bullion coins it supplies to distributors.

The document, which was reportedly presented to authorized purchasers of US Mint bullion coins, said that the Mint’s West Point production facility is no longer able to produce gold and silver coins at the same time, meaning it must choose one metal over another, the report said.

The news of a reduction in the supply of physical gold and silver from the US Mint comes at a time when the physical precious metals market is seeing high demand from investors, who are already forced to pay premiums over the spot prices for access to physical bullion.

Judging from prices on APMEX, one of the largest online bullion dealers in the US, buyers of the US Mint’s American Eagle gold coin must now fork out a minimum of USD 2,115 per ounce, approximately 7.5% over the current spot price. Meanwhile, American Silver Eagles retails for USD 34.8 per ounce for the largest quantities, a whopping 47% above spot.

At pixel time (07:50 UTC), BTC trades at USD 11,144 and is up by 2% in a day and 17% in a week. The price is also up by 21% in a month and 11.5% in a year.
Learn more:
Gold Faces a Very Physical Problem; Bitcoin To the Rescue!
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