Bitcoin And Gold May Gain From Geopolitical Tensions, US Election As Investors Brace For ''Catastrophic Scenario,'' JPMorgan Says

Bitcoin And Gold May Gain From Geopolitical Tensions, US Election As Investors Brace For ”Catastrophic Scenario,” JPMorgan Says

BySteven Walgenbach

Updated: 04 October 2024

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Bitcoin and gold may benefit from geopolitical tensions and the upcoming US election as investors brace for a potentially ”catastrophic scenario,” JPMorgan said.

The investment banking giant said in an Oct. 2 note that these developments would create the conditions for a so-called ”debasement trade” that could drive up demand for the safe-haven assets.

A “debasement trade” is characterized by rising gold demand amid heightened geopolitical risks, uncertainty over long-term inflation rates, and persistently high government deficits in major economies, it said.

Trump becoming president again “would likely reinforce the ‘debasement trade’ both via tariffs (geopolitical tensions) and via an expansionary fiscal policy (‘debt debasement’),” the JPMorgan analysts said.

JPMorgan Says The Markets Have Not Priced In A Trump Victory Yet

Markets have not yet priced in a Trump victory, mainly because traders have been too occupied with the recession trade in the last few months, the investment bank said.

In the event that Trump does win and a “Trump trade” plays out in a similar way to 2016, the JPMorgan analysts believe it could result in higher US Treasury Yields, a stronger dollar, tighter credit spreads and US stock market outperformance.

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JPMorgan’s prediction is based on what was observed in the six month window around the 2016 American election. During this period, 5-year Treasury Yields rose 1%, while the Dollar Index (DXY) surged 8% and US equities outperformed approximately 6%. Banks also beat the rest of the S&P 500 index by 15%.

Bitcoin Outperforms Gold In The Last 24 Hours As Trump’s Polymarket Odds Slip

The price of gold reached a new all-time high of 2,685.49 towards the end of September as investors retreated to the financial safe haven with the escalating conflict in the Middle East. It has since retraced to trade at 2,643 as of 8:42 a.m. EST.

Over the past 24 hours, the sought after commodity was outperformed by BTC. This is after the leading crypto’s price jumped more than 1% throughout the past trading session to reclaim a position above the $61K mark.

Meanwhile, Trump’s odds of winning the election fell by 1% on the decentralized betting platform Polymarket. Vice President Kamala Harris saw her odds rise by an equal amount to regain the lead over her political rival.