Caissa Minute – Gold, Silver & Bitcoin

In this CAISSA minute, we explore gold and silver and Bitcoin. Are they really safe havens?

Despite being considered the quintessential hedge against geopolitical turmoil, gold and silver sold off sharply at the start of the war with Iran.
This sell-off is likely linked to the rise in global yields as gold and silver, they don’t pay a coupon, so as yields rise around the world, the opportunity cost of holding metals increases. Now, the longer-term structural case for holding a small allocation to these metals, it does remain intact.
There’s dollar diversification, inflation protection, geopolitical hedging. But in the near term, gold and silver are navigating competing forces that make its pathway forward just a little bit dicey.

If we look at Bitcoin, after many months of a sustained downward pressure, Bitcoin appears to have found a little bit of a floor here, and maybe even a small rally.
However, the durability of this rally is kind of questionable because people like it for its instantaneous liquidity. It’s very appealing for investors, but its historic positive correlation to stocks selling off in 2022, rallying the subsequent couple of years, it does make it an ineffective diversifier. Moreover, Bitcoin’s viability as a true currency has been a challenge since the creation of a clear regulatory framework for stablecoins.

And its lack of a physical application puts it really at a disadvantage of other commodities. So, for us as investors, we should really hear the signal through the noise that safe haven markets are moving.

And not so much on the geopolitics, per se, but on the elevated oil prices and what that might mean for global growth, inflation and interest rates. All that to say, uncertainty is still very elevated as the conflict goes on.

And as a result, staying diversified and resisting the urge to make large tactical bets remains the most prudent position.

Thank you for spending a minute with CAISSA.