Investing.com -- JPMorgan analysts said in a note Thursday that rising geopolitical tensions, coupled with the upcoming U.S. election, are likely to drive investors toward Bitcoin and gold.
JPMorgan points to what they call the "debasement trade," a strategy that benefits from uncertainty in traditional financial markets.
"Rising geopolitical tensions and the coming US election are likely to reinforce what some investors call the 'debasement trade' thus favoring both gold and bitcoin," said the bank.
Gold has already seen a notable surge in value over the past quarter. By late September, it had approached the $2,700 level, partly due to a weaker U.S. dollar and declining real bond yields.
While a weaker dollar, down by 4-5% during the same period, contributed to this rise, JPMorgan notes that gold's price appreciation has "gone well beyond the moves implied by dollar and real bond yield shifts," suggesting that geopolitical concerns are now a more dominant factor.
Bitcoin, similarly regarded as a hedge against traditional currency risks, is also expected to benefit from these conditions.
JPMorgan analysts highlight that concerns about "debt debasement" due to persistently high government deficits in major economies are pushing investors to seek alternatives to fiat currencies.
The broader shift away from traditional currencies is especially noticeable in certain emerging markets, where confidence in fiat money has waned, according to the bank.
JPMorgan's analysis further points out that demand for gold and Bitcoin is likely to grow as investors search for hedges to protect against "catastrophic scenarios," fueled by geopolitical uncertainty and economic instability.
With both assets poised to benefit from this "debasement trade," JPMorgan expects them to remain attractive options for investors seeking protection against market volatility.