Despite significant structural support, gold, silver, and cryptocurrencies now appear to be at risk of a significant correction in the short term.
Gold, silver and Bitcoin benefit from significant long-term structural support
The long-term appeal of these three “non-sovereign” assets is undeniable, supported by three major macroeconomic forces.
The “de-dollarization” of sovereign balance sheets is accelerating
Widening public deficits, combined with the bipolarization of the world, are fueling fears of chronic “debasement” of fiat currencies. Above all, the threat of the “weaponization” of the dollar, following repeated economic sanctions and the freezing of Russian assets linked to the war in Ukraine, has catalyzed a diversification movement. >Central banks have purchased more than 1,500 tons of gold since 2023, bringing the total value of their gold reserves (approximately $4.5 trillion) to exceed that of their holdings of US Treasury bonds (approximately $3.5 trillion), a first in nearly three decades according to data compiled by the ECB and the World Gold Council.
The erosion of the Fed’s credibility
The persistence of US inflation above the 2% target, combined with political pressure to lower rates, is affecting the central bank’s credibility in its mission of “price stability.”
This implicit tolerance for inflation reinforces the credibility premium of real and alternative assets.
The recent decline in real yields
When bond yields, after subtracting inflation, decline, the opportunity cost of holding a non-coupon asset decreases, making them more attractive to investors. In other words, when safe investments yield less in real terms, investors turn more to tangible assets such as gold or Bitcoin, which then serve as a store of value. These real rates remain within a manageable range for these three assets. The yield on 10-year TIPS has recently continued to decline, settling at 1.69% at the end of October. A further decline in these real rates would support precious metals and Bitcoin, while a rebound would amplify the correction of recent weeks.
Structural support, but risk of short-term correction dominates
While the long-term fundamentals are constructive for all three assets, the air is starting to get thin for precious metals prices after months of almost uninterrupted gains, while a major technical signal is putting an end to Bitcoin’s bullish momentum.
Positioning in both precious metals suggests a now euphoric trend. Inflows into gold ETFs have reached historically high levels over the past three months, close to three standard deviations above their three-year average. At the same time, the positioning of commercial hedgers (producers and refiners) in futures and options contracts is two standard deviations below the three-year average. Historically, this configuration often coincides with tactical peaks and consolidation phases, as was the case last April. The price of gold, which recently hit $4,400 per ounce, is therefore particularly exposed to a wave of short-term profit-taking.
Silver is in a similar situation, but its potential for correction could be offset by its growing use in industry, particularly for solar panels and electric vehicles (approximately +50% of global demand).
Technically speaking, the price of Bitcoin has just broken through a key support level at $108,000, where it had been hovering since July. This movement forms a “double top” pattern, theoretically paving the way for a bearish reversal.
This bearish signal is all the more relevant as it coincides with the famous “4-year Bitcoin cycle,” which predicts a theoretical peak in October followed by a sharp correction over the next twelve months, as was the case in 2018 and 2022.
In conclusion, asymmetry now seems to favor sellers on all three assets for distinct reasons: overly optimistic positioning on precious metals and the break of a major support level on Bitcoin. Nevertheless, the acceleration of the de-dollarization movement, the loss of credibility in the Fed’s independence, and the decline in real rates provide a structurally bullish backdrop. These fundamental factors could reduce the duration and magnitude of the correction, turning tactical risk into an opportunity for long-term investors to strengthen their positions.
