Gold price skyrocketed to over $3,550! Global Central Banks hold more gold than U.S. debt, gold and Bitcoin are facing off.

The global gold market is experiencing a historic turning point, with the latest data showing that for the first time since 1996, global Central Bank gold reserves have surpassed the amount of US Treasury holdings, becoming the preferred asset for official reserves. Gold prices have broken through a historic high of $3,550 per ounce this week, while Bitcoin (BTC) has retreated from a peak of $124,000. Experts warn that this battle for assets between “gold vs Bitcoin” is just beginning.

Central Bank Gold Reserves Surpass US Bonds: First Time in Nearly 30 Years

According to Tavi Costa, a macro strategist at Crescat Capital, global central banks are in the early stages of increasing their gold holdings, with the goal of raising gold's share in official reserves to 80%.

This trend marks an important milestone in the gold market: Central Banks are not only reducing their dependence on US debt but are also using gold to hedge against the depreciation of the dollar and inflation risks.

The European Central Bank's report in June also pointed out that the proportion of gold in global official reserves has surpassed that of the euro, reflecting the hedging demand from countries amid geopolitical and monetary uncertainties.

Dollar pressures and inflation risks drive gold buying spree

Costa pointed out that the United States is facing the dilemma of “dual deficits in the current account and fiscal budget” for the first time in history, with the dollar's valuation at a high level, but the risk of long-term depreciation is increasing.

In this context, gold has become a key tool for central banks in various countries to defend the purchasing power of their national currencies.

Currently, the United States' gold reserves account for 78% of official reserves, Germany at 77.5%, and Portugal even higher at 84%. However, the main driving force behind the increase still comes from emerging markets, and with the weakening of the dollar, central banks in developed countries may also join the ranks of gold purchasers.

Gold prices hit a new high, Bitcoin is in consolidation

This week, gold prices broke through $3,550 per ounce, holding above $3,500 for two consecutive days, indicating strong upward momentum.

Looking back at this year's trend, gold prices first broke through 3,500 USD in April, then adjusted to 3,120 USD, and subsequently consolidated until the end of August, before embarking on a new round of upward momentum.

In contrast, Bitcoin retreated after reaching an all-time high of $124,000 in August, with recent price fluctuations converging, still above the peaks in early January and May, but the momentum has clearly slowed down.

Gold VS Bitcoin: The Showdown of Safe Haven and Risk Assets

Although Bitcoin is often referred to as “digital gold,” there are significant differences between the two in terms of market properties:

Gold: A traditional safe-haven asset that typically performs well under economic uncertainty and inflationary pressure.

Bitcoin: A highly volatile risk asset that can experience significant gains during a bull market, but does not perform as well as gold when safe-haven demand increases.

Since 2020, the US Consumer Price Index (USCPI) has risen from 257 points to 323 points, the price of gold has increased from $1,500 to $3,550, and Bitcoin has skyrocketed from $7,000 to $111,000.

Both are affected by the decline in the purchasing power of the US dollar, but gold is more attractive in the current macroeconomic environment.

Conclusion

The Central Bank's gold reserves surpassing U.S. Treasury bonds is not only a historic turning point in asset allocation but may also trigger a new round of capital flow restructuring in the global capital markets.

For investors, the showdown between gold and Bitcoin is no longer just a matter of choosing between hedging and speculation, but a long-term game concerning the future of currency, the global reserve system, and the reassessment of asset value.

As Costa said: “The long line is used to catch big fish, the golden game has just begun.”