Dollar's Value Loss: Gold and Bitcoin Start to Rise

Dollar's Loss in Value and Investor Reactions

This year, the U.S. Dollar’s loss in value has become an important trading theme among investors. The decline of the dollar has directed many investors toward alternative assets, especially gold and Bitcoin. The process of the federal government shutdown in the U.S. has helped gain momentum for this trade.

The Resurgence of Loss Transactions

Investors developed a strategy called "loss transactions" to capitalize on the dollar's decline ahead of the presidential elections in November 2024. This strategy regained popularity following the government shutdown in the U.S. that began last week. On Friday, gold futures for December on the Comex exchange reached an all-time high of $3,908.90 per ounce, marking the 41st record of the year. On the same day, Bitcoin temporarily rose above $125,000, setting a historic peak.

Evaluations from Economic Experts

The ICE U.S. Dollar Index lost %0.1 on Friday while recording a drop of approximately %10 for the year. Experts note that the trend of moving away from the dollar may increase further. Matt Stucky indicated that loss transactions have gained significant momentum this year, stating, “The decline in real interest rates and high inflation have increased the appeal of these assets.”

Historical and Current Data

Historical data shows that loss transactions do not always accelerate during times of U.S. government shutdowns. However, highlighting that the current shutdown has raised concerns over political instability, Stucky stated, “This situation has become a factor supporting large budget deficits.”

Direction of Institutional and Individual Investors

Recently, the trend of individual investors moving towards gold and Bitcoin exchange-traded funds (ETFs) indicates the acceleration of this strategy. JPMorgan data reveals that individual investors are targeting loss transactions more than institutional investors. Citi analyst Alex Saunders predicts that Bitcoin is viewed as “digital gold” and that its price target will be $181,000 within the next 12 months.

Long-Term Expectations

Experts agree that the risk of loss in the dollar will be long-term. Jeff Muhlenkamp notes that he allocated %18 of his portfolio to gold, adding that the structural budget deficits of the U.S. have made this issue unlikely to be resolved in the short term.