Which Safe Haven Against the Weakening Dollar: Gold or Bitcoin? Goldman Sachs Explained

Goldman Sachs argues that gold is the safest haven against the weakening dollar, predicting that gold prices could reach 4,000 dollars per ounce. According to the institution, gold will surpass both Bitcoin and silver in this process.

Goldman Sachs commodity strategist Lina Thomas, reminding that investors have turned to selling gold and moving into Treasury bonds when U.S. interest rates rose for many years, states that this relationship was disrupted after Russia's invasion of Ukraine in February 2022. The freezing of the assets of the Russian Central Bank by Western financial authorities has shaken the confidence in the dollar and euro, which are seen as safe havens.

According to Thomas, this development was particularly a warning for central banks: "If your assets can be frozen by foreign politicians, then those assets are no longer truly risk-free."

According to Goldman Sachs' analysis, this uncertainty environment has led central banks around the world to increase their gold purchases. The monthly average purchases, which were 17 tons before 2022, reached 22 tons after the Ukraine war and are expected to reach 94 tons by 2025. Especially, major producers like China and Russia have turned to gold; China aims to convert 20% of its reserves into gold.

Goldman Sachs states that the ongoing surge in demand could push gold prices to $4,000 per ounce with an increase of about 30%. The low volatility of gold and its low correlation with stocks make it attractive for investors. The co-head of the institution's commodity research, Daan Struyven, says, "Bitcoin and gold provide protection against inflation due to their limited supply; however, gold is a more solid choice because it is less volatile and has a lower correlation with tech stocks."

According to Struyven, the connection of Bitcoin with technological stocks and its high volatility make it riskier against economic downturns. This explains why central banks are hoarding gold instead of Bitcoin or silver.

When it comes to silver, Thomas highlights three fundamental reasons: Silver oxidizes over time, losing value, it is much bulkier and harder to transport compared to gold, and it is not recognized as a reserve asset by the IMF. "Silver is outside the interest of central banks; it is more of an industrial metal."

According to Goldman Sachs, the gold market is only about 0.5% of the stock market. Therefore, even a small allocation to gold in portfolios can create significant movements in prices.

Thomas's last message is as follows: "Gold is no longer just a historical relic. In the face of a dollar that has lost the confidence of macro investors, gold is renewing its safety."