Bitcoin demand is also being fueled by speculators, which has created a scenario of return-chasing behavior. This profit-seeking motivation behind bitcoin is seen as a complete opposite to the investment rationale behind holding onto gold.
“A critical investment benefit offered by gold is its role as a hedge against market turmoil, geopolitical volatility, and systemic risk,” Gold said. “Gold provides diversification through its historically low correlations with most asset classes, particularly equities. In this capacity, gold has exhibited an average return of +7% compared to a -21% average return in the S&P 500 during market drawdowns of 10% or more since 1987. These hedging and potential risk mitigation characteristics showcase gold’s chief investment role is rooted in risk management not capital appreciation.”
Furthermore, gold has real-world application from jewelry and electronics. In contrast, bitcoin only enjoys utility from widespread acceptance and use in broad transactions, which has yet to manifest.
Investors who still want to access precious metals may consider a number of physically backed metals-related ETFs as a way to diversify a traditional stock and portfolio, including ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), ETFS Physical Silver Shares (NYSEArca: SIVR), ETFS Physical Platinum Shares (NYSEArca: PPLT) and ETFS Physical Palladium Shares (NYSEArca: PALL). ETF investors can also use the ETFS Physical Precious Metals Basket Shares (NYSEArca: GLTR) as a catch-all of all four precious metals.
For more information on the metals space, visit our precious metals category.