##What Does Bitcoin’s Increasing Correlation With Gold Mean?

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The price of the world’s largest cryptocurrency has finally broken out of its consolidation phase and passed by its important resistance at $10,000. As Bitcoin hovers just over $11,000, it was also exhibiting stronger correlation with the precious monetary metal — gold.

Gold’s qualities have often been compared to that of Bitcoin, and the digital asset has been called digital gold for possessing similar qualities. One of these qualities was of being a safe haven asset, which would not succumb to unfavorable economic conditions. Recently, gold hit an all-time high over the past week, while Bitcoin’s safe haven narrative was being questioned upon its month-long consolidation. This surge in BTC’s price reinforced its safe haven narrative.

While the market has been noting nominal interest rates for the foreseeable future and inflation expectations still moderate, but with the potential to rise, holding non-yield producing assets like gold and Bitcoin is getting more attractive, according to the latest report from CoinMetrics. There has been a growing trend of people using Bitcoin as a call option on inflation, but the coronavirus and its monetary and fiscal response have increased the uncertainty in the future path of monetary policy, inflation and growth, all of which are beneficial to Bitcoin’s prices. Currently, the correlation between gold and Bitcoin reaches its all-time high, a level that was last seen in March.

The chart above indicates that the correlation between the two assets has usually oscillated around zero while reaching brief moments of high positive and negative correlation. Now the correlation was at a high positive and it can be sustained, it may be an indication in a shift in Bitcoin’s response to geopolitical and macroeconomic situation.

As the largest crypto climbs higher every day and its balances on exchanges decrease, the following weeks will be cruical to determine the direction of the price for Bitcoin.