Investing.com - Bitcoin is not sapping demand for gold, despite its eye-popping rally this year, according to Goldman Sachs (NYSE:GS).
Bitcoin surged to a record high of $17,270 on Monday, up from around $1,000 at the beginning of the year as Cboe Global Markets launched bitcoin futures. In comparison, gold has risen less than 10% in 2017.
The frenzy over bitcoin and the lackluster performance of gold have led investors to ask if the cryptocurrency taking demand from the precious metal.
Analysts at Goldman said that while bitcoin has shown much greater volatility and lower liquidity compared to gold, it has a current market cap of $275 billion, which is dwarfed by gold’s $8.3 trillion.
They said the investor pools for gold and bitcoin are “vastly different”, with gold investors covered by various regulations. A lack of clarity on how cryptocurrencies could eventually be regulated has created huge hurdles for professional investors.
Goldman noted that there is no evidence of a mass exodus from gold, with total known holdings in bullion-backed ETFs near the highest since May 2013.
They also said the market characteristics of gold and cryptocurrencies are different, with bitcoin attracting more speculative inflows relative to gold.