Here’s why bitcoin and gold are both in rally mode approaching year-end

Bitcoin and gold made significant gains over the weekend, with gold reaching its highest intraday high on record before pulling back, and bitcoin reaching its highest level since April 2022 on Monday. This rally was driven by optimism surrounding the Federal Reserve’s monetary policy, according to Mark Connors, director of research at digital asset-management company 3iQ.

Traders are pricing in a greater than 50% likelihood that the U.S. central bank will cut its key interest rate by 25 basis points at its March meeting, signaling a shift in the Fed’s stance. This, coupled with a significant decline in the 10-year Treasury yield, has created a bullish environment for both gold and bitcoin.

Historically, gold and bitcoin have often traded in tandem during times of economic uncertainty, such as during the U.S. banking crisis in March and the Israel-Hamas conflict in October. While some experts believe the rally in both assets is coincidental, others attribute bitcoin’s rally to optimism surrounding the potential approval of a bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission.

Looking ahead, the U.S. jobs report will be a key factor to watch for gold, as weaker-than-expected data could put further pressure on the U.S. dollar and support a higher gold price. Meanwhile, bitcoin is expected to continue its rally, potentially reaching as high as $47,000 if a bitcoin ETF is approved.

On Monday, front month gold futures lost 2.3% to $2024.10 per troy ounce, while bitcoin rose 5.5% to nearly $41,900. The broader market also saw declines, with the Dow Jones Industrial Average down 0.1% and the S&P 500 declining 0.5%.

The uptick in both gold and bitcoin comes at a time when investors are closely watching the Federal Reserve’s monetary policy and economic indicators for clues about the future direction of these assets. As the market continues to react to changing macroeconomic conditions, the outlook for gold and bitcoin remains uncertain but highly influenced by central bank policies and market sentiment.

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