Gold price is set to drop further as more institutional investors are growingly adopting Bitcoin and other better-performing digital currencies, according to analysts at JP Morgan, America’s biggest bank. At the time of writing, the price of gold is trading at $1,835, which is 6.60% lower than the YTD high of $2070. Bitcoin price is up by 1.30%, trading at $18,447.
In a report cited by Bloomberg, the analysts said that the biggest concern for gold can be that many institutional investors have shifted their financial resources to Bitcoin and other cryptocurrencies. This includes many high-profile companies such as Square, PayPal and MicroStrategy.
Indeed, in the past few months, gold ETFs have faced a sharp drop in assets by about $7 billion while the GrayScale Bitcoin Trust has increased by more than $2 billion. They wrote:
“If this medium to longer-term thesis proves right, the price of gold would suffer from a structural flow headwind over the coming years.”
JP Morgan says that Bitcoin only accounts for 0.18 per cent of family office assets in comparison to 3.3 per cent for gold ETFs.
This is why the price of gold has fallen even as the US dollar has dropped to the lowest level since 2018.
The bank notes that there is a good chance that BTC prices overshoot and gold is due for recovery. It also said that momentum signals for Bitcoin have deteriorated and is likely to cause selling by investors that trade on price trends.
Gold Price technical outlook
Turning to the four-hour chart, we understand that gold price is under pressure. In the past few days, it has moved from a high of $1,875 to the current $1,835. This price is also below the 38.2% Fibonacci retracement level and the 25-period and 15-period moving averages. As a result, at this point, the path of least resistance for the metal is lower, with the next main target being at $1,800.