Is Bitcoin a competitor to gold?
According to data from the World Gold Council, central banks around the world net purchased 60 tons of gold in October, setting a record for the highest monthly total this year. Emerging market central banks dominated the gold market, particularly those of India, Turkey, and Poland. Meanwhile, the People's Bank of China increased its gold holdings for the first time after a six-month pause. The appreciation of the US dollar has exacerbated the depreciation of emerging market currencies, prompting central banks to allocate gold. Powell's remarks have made Bitcoin a competitor to gold, although former Treasury Secretary Summers questioned the strategic significance of Bitcoin as a reserve asset
According to data from the World Gold Council, central banks around the world net purchased 60 tons of gold in October, setting a record for the highest monthly total this year.
Among them, the Reserve Bank of India increased its holdings by 27 tons, bringing its total gold purchases for the year to 77 tons, five times that of 2023. Turkey and Poland net purchased 17 tons and 8 tons, respectively, raising their total purchases for the year to 72 tons and 69 tons, accounting for 34% and 17% of their total reserves, respectively.
Emerging market central banks continue to dominate the gold market, with the three aforementioned central banks accounting for 60% of the global net purchases this year.
Figure: Total net gold purchases by central banks year-to-date (tons)
According to the latest data released by the People's Bank of China, gold reserves at the end of November stood at 72.96 million ounces, an increase of 160,000 ounces from the end of October, marking the first increase in gold holdings by the central bank in six months, after a six-month pause in increasing gold reserves.
In October, the rapid appreciation of the US dollar put depreciation pressure on emerging market currencies, stimulating central banks' motivation to allocate gold as a reserve asset. Previously, in the first three quarters of 2022 and the third quarter of 2023, the appreciation of the dollar had triggered a wave of central bank gold purchases.
Over the past two years, the trend of de-dollarization has driven the demand for central banks to increase gold as a reserve asset, pushing gold prices to new highs.
However, last week, a statement from Powell introduced a competitor for gold—Bitcoin.
Since Trump's election victory, Bitcoin has risen over 40%, and last week it broke the $100,000 mark, driven by optimistic sentiment surrounding the easing of cryptocurrency regulations.
At the same time, former US Treasury Secretary Summers questioned the idea of using Bitcoin as a reserve asset. He argued that, unlike oil and gold, holding Bitcoin as a reserve does not have strategic significance