In 2025, gold has been on a remarkable rally, reaching all-time highs above $3,400/oz as investors seek safety amidst a turbulent macro environment. The precious metal has seen double-digit year-to-date gains due to robust safe-haven demand. This surge in gold’s price and Bitcoin’s slower performance are both attributed to eroding confidence in fiat money, volatile geopolitics, and deeply negative real yields. Market data shows that the “digital gold” narrative is strengthening, with both assets moving in tandem more often for similar reasons.
Gold started the year around $2,600 and has added roughly one-third to its price, increasing its global market cap by about $9 trillion. On the other hand, Bitcoin opened the year close to $92,000, dropped to around $83,000 in early April, and is currently trading around $88,700 with a 4% decline year-to-date. Despite this gap, the correlation between gold and Bitcoin demonstrates a familiar pattern where gold rallies first as a liquidity hedge, followed by Bitcoin catching up as capital seeks higher-beta investments.
The explosive rally in gold can be attributed to various macroeconomic factors such as ten-year Treasury notes hovering near 4.5% and core inflation close to 5%, resulting in real yields below zero. In this environment, assets like gold and Bitcoin, which offer no coupon, become more appealing as inflation erodes the value of money. Factors such as the Fed’s balance sheet exceeding $10 trillion, rising fiscal deficits, and high inflation expectations drive investors towards assets like gold and Bitcoin as stores of value.
Political events, such as the war in Ukraine, have prompted central banks in countries like China, India, and the Gulf to accelerate gold purchases, fearing reserve confiscation. Bitcoin, with its fixed supply of 21 million coins, also resonates as an apolitical instrument that cannot be frozen. Both gold and Bitcoin tend to firm together in response to sanctions or geopolitical tensions, especially when the US dollar weakens, magnifying their values in dollar terms.
Investment flows into gold-backed ETFs and spot Bitcoin ETFs confirm the alignment of these assets within the same “sound-money” category. Institutions have been pouring capital into gold-backed ETFs, reversing two years of net selling, while spot Bitcoin ETFs have also seen net inflows, albeit at a smaller scale. Despite these shared drivers, Bitcoin has not kept pace with gold’s rally in 2025, partly due to its smaller market cap and lack of federal regulation, which may deter some institutional investors.
While correlation between gold and Bitcoin does not guarantee equal returns, it does indicate that investors perceive both assets similarly in terms of limited supply in a world of excessive issuance of currency. The historical response to money printing has shown a two-stage reaction: gold first, followed by a more aggressive alternative, which was silver in the 1970s and Bitcoin in the 2010s. The current environment suggests that Bitcoin may have room to catch up to gold’s trillion-dollar climb once more gatekeepers open up to the digital asset.
In conclusion, the surge in gold’s price in 2025 highlights the potential for Bitcoin to see a similar rally as both assets are viewed as safe havens in times of economic uncertainty. With macroeconomic factors driving investors towards assets that provide a store of value, the correlation between gold and Bitcoin suggests a shift towards digital assets like Bitcoin as a potential alternative to traditional investments. As the market evolves, it will be interesting to see how Bitcoin catches up to gold’s performance and solidifies its position as a valuable asset in the global economy.
