John Doe's ResearchCosto sells off gold bullion - a better investment than Bitcoin? John Doe's Research

Gold and other assets

Over the same period, gold's returns have roughly matched those of the S&P 500, which is up 15.4%, and WTI crude oil, which is up 12%. However, these gains pale in the face of bitcoin's (BTC) staggering 39.5% rise. However, it is important to note that gold's lower volatility of 12% makes it an attractive choice for investors looking to manage risk.

Gold as a store of value

One of gold's strengths is its reliability as a store of value in times of crisis and uncertainty. Gold, as the world's largest traded asset, valued at more than $12 trillion, is being pushed ahead as a prime candidate for capital inflows as investors exit traditional markets such as equities and real estate.

For example, during the COVID-19 pandemic, gold fell just 2.2% in the 30 days to March 24, 2020. According to the World Gold Council, central banks were net buyers of gold for the second month in a row, increasing their reserves by 55 tons, with significant purchases made by China, Poland and Turkey. Bloomberg reports that Russia plans to bolster its gold reserves by an additional $433 million to protect its economy from volatile commodity markets, especially in the oil and gas sector.

Production and investment potential

Focusing on production figures, Visual Capitalist estimates that approximately 3,100 tons of gold were produced in 2022, with Russia and China contributing 650 tons to the total.

One important metric to consider when assessing gold's investment potential is its stock-to-flow ratio, which measures the commodity's production relative to the total amount in circulation. The gold reserve-to-flow ratio has remained stable at around 67 for the past 12 years. At the same time, bitcoin had three planned halves, which actually reduced its output, and currently has a stock-to-flow ratio of 59. This suggests that bitcoin has a lower equivalent inflation rate compared to precious metal.

The value of bitcoin

The performance of bitcoin could surpass that of gold as the U.S. government nears a shutdown over reaching the debt ceiling, forcing investors to seek alternative scarce assets. Bitcoin's $500 billion capitalization makes it easy for its price to rise, even if its inflows are much smaller. In addition, central banks may be forced to sell their gold reserves to cover costs, further increasing the attractiveness of bitcoin.

Findings

There is also the possibility of new gold deposits being discovered. While gold remains a solid safe haven asset, bitcoin's impressive growth and its lower equivalent inflation rate make it a strong competitor for investors looking for alternative stores of value. Despite this, ongoing economic uncertainty and Federal Reserve monetary policy will continue to favor both assets.

This article is for general information only and does not constitute legal or investment advice. The statements, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.