Charles Esther
Gold prices rose by 3% between May 29 and June 2, reaching their highest level in over three weeks.
Bitcoin (BTC) is maintaining its position above $105,000 during the same period.
The upward movement in gold and steady Bitcoin price comes amid a weakening US dollar, which is causing investors to look for alternative assets.
The US Dollar Index (DXY) recently dropped to its lowest point in six weeks.
This decline indicates that investors are reducing their exposure to the US currency.
Typically, a falling DXY reflects waning confidence in the Federal Reserve’s monetary policy and growing concerns about the sustainability of US government debt.
US Treasury Secretary Scott Bessent reassured the public on May 1 by stating the US “is never going to default,” but admitted the country “is on the warning track.”
These comments followed warnings from JPMorgan Chase CEO Jamie Dimon regarding a House of Representatives bill proposing a $4 trillion increase to the US debt ceiling.
A weaker DXY encourages holders of the $31.2 trillion in outstanding US federal debt to seek higher returns elsewhere.
Fixed-income investments usually offer predictable returns, but the volatility of the US dollar pushes investors to explore foreign currency-based investments with potentially better yields.
Despite gold’s traditional appeal as a safe haven, several factors could limit investor demand.
The US government holds the largest gold reserves globally, giving the Treasury the option to sell part of these reserves to improve its fiscal position.
Selling gold reserves and repurchasing long-term debt could strengthen the US dollar.
However, even if the US sold 17% of its gold reserves—worth about $171.8 billion at current prices—it would still remain the world’s largest gold holder by a large margin.
This amount would only cover roughly three weeks of the federal deficit, making such sales a relatively ineffective fiscal tool.
In contrast, investing $171.8 billion in Bitcoin would significantly increase US holdings in the cryptocurrency, surpassing China’s estimated 190,000 BTC.
This is increasingly plausible following the signing of the Strategic Bitcoin Reserve Executive Order by President Donald Trump in March 2025.
While the US holds the largest gold reserves, it is not among the top producers.
According to the World Gold Council, China, Russia, Australia, and Canada lead global gold production.
Thus, the US has limited incentive to support rising gold prices, especially amid ongoing trade disputes and geopolitical tensions.
Data from gold exchange-traded funds (ETFs) shows net outflows despite the recent price increase in gold.
Meanwhile, spot Bitcoin ETFs have recorded $3 billion in net inflows since May 15.
This trend may not indicate that gold investors are moving directly to cryptocurrencies but suggests a lack of confidence in gold’s short-term potential.
Gold has grown into a $22.7 trillion asset class, which makes it less attractive compared to stocks and alternative investments.
Bitcoin’s $2.1 trillion market capitalization signals considerable room for future growth.
Rather than competing directly with gold, Bitcoin is gaining popularity as concerns grow over US fiscal stability.
These concerns are a key factor driving gold’s rise and are now also bolstering Bitcoin’s appeal to investors.
The evolving financial landscape suggests that both gold and Bitcoin will play important roles as alternative stores of value amid uncertainties in the US dollar and government debt situation.
