Safe-haven funds repricing: The logic behind gold's strength and Bitcoin's divergence

Author: 137Labs

Amidst escalating risk aversion in global markets, asset performance is diverging more pronounced. Gold remained above $5,000 per ounce for the second consecutive trading day, while Bitcoin showed signs of fatigue amidst high-level consolidation. Fund flow data indicates that investors are systematically adjusting their risk profiles across different assets.

Over the past week, Bitcoin-related funds have experienced a net outflow of more than $1.3 billion , becoming an important part of the overall withdrawal wave of cryptocurrency ETFs.

Gold continued its strong performance, fueled by a weakening dollar and geopolitical risks.

International gold prices rose for the seventh consecutive trading day, influenced by factors such as heightened geopolitical tensions, escalating sovereign debt concerns, and a continued weakening of the US dollar. Gold prices rose as much as 1.3% during the session, firmly establishing themselves above the $5,000 mark. Meanwhile, silver prices rose nearly 7% in a single day, indicating that the precious metals sector as a whole was favored by safe-haven funds.

Recently, US President Trump has repeatedly made tough trade and diplomatic statements, including tariff threats and geopolitical remarks, which have fueled market concerns about policy uncertainty. Meanwhile, the US dollar index has fallen to its lowest level in nearly four years, and the market is even speculating that the US may intervene in the foreign exchange market to stabilize the yen.

Institutional View: The Two Core Supports for the Gold Bull Market Remain

Daniel Ivascyn, investment director and managing director of PIMCO, one of the world's largest bond managers, pointed out that the current rise in gold prices is not driven by short-term sentiment, but by deep structural factors.

He stated that there are two main factors supporting the long-term performance of gold:

"One factor is the continued rise in global geopolitical tensions, and the other is investors' concerns about the high debt levels of governments around the world. As long as these two factors continue to play a significant role in the market, gold is likely to continue to perform very well in the long run."

Historically, gold prices have more than doubled in the past two years and have just recorded their best annual performance since 1979. Year-to-date, gold prices have risen by approximately 17% , highlighting their defensive characteristics in an environment of systemic risk.

Volatility is rising in tandem, and the risk of a short-term correction is beginning to emerge.

Despite the continued positive outlook on the long-term prospects, some market participants remain cautious about the short-term trend of gold.

Stephen Innes, Managing Partner of SPI Asset Management, pointed out that the market has recently become highly sensitive to the direction of Trump's policies:

"Today it's tariffs, tomorrow it's geopolitics, and the day after tomorrow it might involve the independence of the Federal Reserve. This recurring uncertainty will inevitably exacerbate short-term market volatility."

Data shows that the implied volatility of gold futures on the New York Mercantile Exchange (COMEX) has risen to its highest level since the beginning of the COVID-19 pandemic in 2020 ; at the same time, the volatility of the world's largest gold ETF, SPDR Gold Trust, is also at a high level.

Ivascyn also cautioned that precious metals may experience a technical pullback in the short term:

“Recently, precious metals such as gold and silver have significantly outperformed other assets, partly due to continuous increases in holdings by individual investors and a relatively rapid price rise. Therefore, a significant correction in the short term cannot be ruled out.”

Bitcoin stagnates as funds continue to withdraw from the crypto market.

In stark contrast to gold's continued strength, Bitcoin's price has recently hovered around $87,000 , with persistently low trading volume. Since its high last October, Bitcoin has corrected by approximately 25% , with a 6% drop in the past seven days alone.

In terms of fund flows, investors are accelerating their withdrawal from crypto assets. Data shows that in the past week, Bitcoin-related funds saw a net outflow of over $1.3 billion, quickly reversing the brief inflow of funds seen earlier this year.

JPMorgan Chase: Cryptocurrency ETFs Experience Systemic Outflows

In a recent report, JPMorgan noted that in the current market environment, stocks and precious metals are attracting large inflows of funds, while cryptocurrency ETFs are facing continued pressure.

The report shows that broad-based equity ETFs are experiencing one of the largest net inflows in history, while crypto-related ETFs are seeing continued selling by investors, reflecting a significant decline in risk appetite.

Experts question whether Bitcoin can serve as a stable macroeconomic hedge.

Stephane Ouellette , CEO and co-founder of FRNT Financial Inc., believes the crypto market currently faces multiple challenges:

"On the one hand, artificial intelligence has attracted a lot of capital in the past year; on the other hand, cryptocurrencies are being excluded from inflation trading."

This phenomenon has once again sparked academic discussion about Bitcoin's safe-haven properties. Duke University professor Cam Harvey stated bluntly:

"Bitcoin is unlikely to replace gold as the preferred safe-haven asset for investors."

The analysis team at crypto asset firm Tagus Capital also pointed out that Bitcoin's hedging effect has significant limitations:

"Bitcoin's returns may react to loose monetary conditions or concerns about fiat currency devaluation, but academic research shows that this hedging effect is sporadic, weaker than gold, and highly influenced by risk appetite, liquidity, and similar stock-like factors."

Conclusion: Safe-haven funds are redefining "safe assets".

In summary, the continued record highs in gold and the sluggish performance of Bitcoin are not accidental phenomena, but rather a reflection of global funds re-prioritizing asset security and stability during a period of high uncertainty.

In the short term, precious metals may remain relatively strong driven by safe-haven demand; however, for Bitcoin to regain market consensus as a "macro hedge asset," it still needs to wait for a recovery in risk appetite and a more stable macroeconomic environment.

The views expressed in this article are based on publicly available information and the author's judgment, and should not be used as any investment advice. The market is risky, and investment requires caution.