Gold steadies, bitcoin plunges as debasement trade rally comes to a halt

Core Insights - Gold prices stabilized after experiencing the worst intraday drop in over 12 years, with futures hovering near $4,120 per troy ounce following a 5.5% drop in the previous session due to profit-taking and a stronger US dollar [1][2] Group 1: Market Dynamics - Prior to the sell-off, gold had surged 65% year-to-date, driven by strong global central bank demand and investor interest as a safe-haven asset amid fiat currency declines [2] - The potential for volatility has been highlighted due to the rapid rally, but precious metals are expected to remain supported by macroeconomic, fundamental, and momentum-driven factors [3] Group 2: Future Outlook - Expected rate cuts from the Federal Reserve, increasing demand for precious metals, and ongoing political uncertainty are anticipated to support gold prices into the first quarter of 2026 [4] - Real interest rates in the US may fall below zero due to persistent inflation, making the US dollar less attractive and potentially increasing flows into precious metals [4] Group 3: Investment Strategies - Gold is viewed as an effective portfolio diversifier, with potential gains towards an upside case of $4,700 per ounce if adverse macro and political developments occur [5] - The pause in gold's rally may create rotational opportunities for Bitcoin, which has been stabilizing after a volatile period [5][6] Group 4: Cryptocurrency Correlation - Bitcoin experienced a decline of about 3% to around $108,000 per token, reversing a three-day recovery, with a noted lead-lag relationship between gold and Bitcoin over recent years [6][7]