JPMorgan Analysts See 'Debasement Trade' Trend Favoring Gold, Bitcoin Amid Geopolitical Tensions

This shift, referred to as the “debasement trade,” is driven by concerns over economic instability and currency devaluation, The Block reported.

Gold and Bitcoin are emerging as "safe-haven" assets amid rising geopolitical tensions and the upcoming U.S. presidential election, according to analysts at JPMorgan Chase and Co (NYSE:JPM).

This shift is part of a trend known as the "debasement trade," which is driven by concerns over economic instability and currency devaluation, The Block reports.

"Rising geopolitical tensions and the coming U.S. election are likely to reinforce what some investors call the ‘debasement trade’ thus favoring both gold and Bitcoin (BTC/USD)," J.P. Morgan analysts Nikolaos Panigirtzoglou, Mika Inkinen, Mayur Yeole and Krutik P Mehta wrote in a recent note.

Gold's price has shown a muted response to recent geopolitical events, but it surged to nearly $2,700 on Sep. 26.

The precious metal's gains come as the dollar fell by about 4-5% and real U.S. Treasury yields dropped by 50-80 basis points.

However, the analysts say these factors alone don't fully explain the sharp increase in gold's price, indicating the return of the "debasement trade."

The "debasement trade" is influenced by several factors, including escalating geopolitical uncertainty in 2022, ongoing inflation concerns, large government deficits in major economies and a weakening confidence in fiat currencies, especially in some emerging markets.

Rising geopolitical tensions this year, such as the Iran-Israel conflict, have contributed to market volatility.

According to Santiment, the Fear and Greed Index has moved into the fear zone, reflecting the market's uncertainty.

Meanwhile, Charles Edwards, founder of Capriole Investments, highlighted Bitcoin's strong correlation with U.S. liquidity measures and gold's recent breakout to new highs, suggesting a bullish outlook for Bitcoin.

He noted that Bitcoin usually lags gold by a few months, indicating a potential upside for the apex cryptocurrency.

To gain further insights into these developments, the upcoming Benzinga Future of Digital Assets event on Nov. 19 will provide an ideal platform for investors and enthusiasts.

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