On Monday, gold reached an all-time high and bitcoin reached its best price in over two years as frantic investor anticipation that interest rates will drop in the upcoming year rippled through assets worldwide.
On Monday, the price of cryptocurrencies surged to above $42,000, partly due to hopes that the industry’s harshest penalties had been lifted. Afterwards, it dropped back to $41,662, up 7.4% from the day before.
According to LSEG data, gold rose as much as 3% to $2,135 per troy ounce on Monday, setting a new record, before falling to $2,025 per troy ounce.
The actions come after a recent frenzy for bonds and stocks, driven by mounting anticipation that the Federal Reserve will soon lower borrowing costs notwithstanding
“You look at bitcoin and gold and you see a very similar kind of evolution,” said Luca Paolini, chief strategist at Pictet Asset Management. “All the asset classes that tend to do well when the Fed cuts rates aggressively are doing well.”
Traders are now betting the first rate reduction could come as soon as March after a sharp decline in government and corporate borrowing costs as US bond markets enjoyed their biggest monthly rally in nearly four decades in November.
Lower yields on ultra-safe US Treasury debt have made other assets relatively more attractive to investors. The S&P 500 index closed at its highest level since March 2022 last week, although it was down 0.6 per cent midway through Monday’s session.
Recent US economic data has been resilient even while inflation has fallen, further boosting risky assets like stocks. Max Kettner, chief multi-asset strategist at HSBC, said markets were in the grip of an “everyone-is-happy-Goldilocks rally” across “virtually all asset classes”.
Traders said the momentum to buy bitcoin, whose value has climbed by more than a fifth in the past month, was also driven by growing interest among investors after the closure of two of the most high-profile criminal cases that had hung over the market for the last year.