Today, there was a new surge in the gold price, with Bitcoin reacting negatively by plummeting over 3%.
There is indeed the theoretical possibility that a significant increase in the price of gold could attract capital, partially draining it from the crypto markets.
The rise in the price of gold
On Friday, trading on the stock exchange of gold derivatives had closed the week with a price of about $3,650 per ounce.
It was a very high price, but not the all-time high, as both Tuesday and Wednesday had seen peaks above $3,700.
Note that a daily close above this last threshold has not yet occurred, although today it seems that it might happen. So far, the maximum close has been $3,659 per ounce just on Wednesday.
On Thursday, the price of gold had reached a daily low peak at $3,627, more or less replicated on Friday as well.
Today, however, it already opened at $3,687, and then pushed up to a peak of $3,728, which is the all-time high.
In other words, it seems that the rally of the gold price has resumed.
The previous one had started on August 20 from the level of $3,316, and by September 2 it had already recorded a new all-time high. The historic surpassing of the $3,600 per ounce threshold occurred on September 5, and on the 16th, the surpassing of $3,700 also occurred.
Therefore, the correction lasted only two days (October 17 and 18), and it was very small. In fact, the very next day there was a rebound, and today the rally has resumed.
The Trend of Bitcoin Price
A different discourse, however, concerns Bitcoin.
After the all-time high recorded in mid-August, and the subsequent correction, there was a rebound that lasted from the end of August until last Thursday.
In the same period, the price of gold was also on the rise, so it cannot be said that the rise in gold was holding back Bitcoin. Also because the price of gold had already been at $3,500 per ounce in April, and until the first of September, it had remained below that threshold.
After the strong daily growth last Monday, the price of gold remained relatively steady until yesterday, with the very small correction mentioned above ending on Friday.
In those days the price of Bitcoin instead rose, going from about $115,000 to almost $118,000.
As of Friday, it was at $117,000, but by the close of the trading session, gold had already started to rise slightly, moving from $3,650 per ounce to $3,680. While this was happening, the price of Bitcoin was dropping from $117,000 to $115,000.
During the weekend, with traditional markets closed, the price of Bitcoin did not move significantly, but last night, with the reopening of Asian markets, the situation changed.
Gold immediately jumped to $3,690, and Bitcoin reacted with a drop to $114,000. Subsequently, gold rose to $3,700 per ounce, and Bitcoin suddenly fell below $112,000, due to the forced liquidations of leveraged long positions.
The Role of the Dollar
Note that at the reopening of the Asian markets, the Dollar Index initially moved slightly upward, then the rise accelerated, but then it reversed direction and moved upward.
Now, for example, it has dropped to 97.5 points, which is below the initial 97.7.
It is possible that, in reality, it was mainly these movements of the dollar that caused the price of Bitcoin to fall, especially since the decline stopped when the direction of the Dollar Index reversed course.
However, while it is possible that the movements of the Dollar Index primarily influenced the price trend of Bitcoin, it cannot be ruled out that the renewed appeal of the rising gold price also played a part.
Indeed, perhaps it is precisely for this reason that at a certain point, while Bitcoin was already declining, a flash-crash was triggered due to the forced liquidation of many leveraged long positions.
Therefore, the Dollar Index may have triggered the initial decline, while the flash-crash might have been triggered later by the capital drain from gold.
It should not be forgotten that Bitcoin is considered by many as digital gold, meaning a store of value similar to gold but risk-on, unlike gold which is risk-off. When there is a flight from risk-on in the markets, capital moves from these markets to risk-off ones, such as the gold market.