Gold Slips Under Macro Pressure; Bitcoin Follows Liquidity Trend

• Gold is approaching a technical bear market, falling nearly 20% from its all-time high reached in January.
• Macroeconomic pressures, including interest rates expected to remain restrictive through December 2026, are weighing heavily on traditional safe-haven assets.
• Bitcoin remains approximately 40% below its October high but continues to track liquidity trends similar to its 2021 performance when adjusted for money supply.

Gold Struggles Under Macroeconomic Pressure

Gold is currently facing significant headwinds, nearing a technical bear market with a decline of almost 20% since its peak in January. Despite its reputation as a hedge against geopolitical instability, the metal has failed to gain momentum amidst ongoing conflicts. Since the end of February, gold prices have dropped by roughly 10%, even as tensions in the Middle East escalated.

The broader economic outlook has shifted, with markets now anticipating that interest rates will stay elevated for a longer period. Current projections suggest restrictive policies could remain in place until December 2026. Additionally, rising oil prices are contributing to inflationary pressures, further complicating the environment for gold investors.

Liquidity Adjustments and Historical Comparisons

When analyzing gold through the lens of the M2 money supply, its current valuation sits near levels observed during major historical peaks in 1974 ($200 per ounce) and 2011 ($1,800 per ounce). This suggests that gold may be establishing a cyclical floor relative to global liquidity. Key factors affecting this valuation include:

• The inclusion of cash, deposits, and other liquid forms of money in M2 metrics.
• A consolidation phase at historically elevated levels.
• The impact of rising energy costs on inflation expectations.

Bitcoin and the Liquidity Trend

In contrast to gold's recent struggles, Bitcoin appears to be following a historical pattern of consolidation. Although it is trading 40% below the high recorded in October, its performance relative to M2 liquidity mirrors the behavior seen in 2024 and is currently retesting its 2021 highs on a liquidity-adjusted basis. Historically, Bitcoin has surpassed previous peaks in every cycle once adjusted for the global money supply.

Converging Market Movements

Recent market data shows a surprising synchronization between gold and digital assets. After a breakdown from the $5,000 level on Wednesday, gold has begun trading in close correlation with Bitcoin. This marks a departure from earlier in the year when the two assets showed diverging trends, indicating that both are now reacting similarly to global liquidity shifts and macroeconomic stressors.