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Goldman's top commodity analyst views copper as an alternative to crypto

Goldman's top commodity analyst views copper as an alternative to crypto

June 2, 2021: Cryptocurrencies are an alternative to copper, not gold, when it comes to hedging against inflation, according to global head of commodities research at Goldman Sachs, Jeff Currie.

Inflation is increasing as the global economy recovers from the effects of the coronavirus crisis as central banks keep monetary policy historically loose and demand outstrips supply on many fronts. The Federal Reserve’s U.S preferred inflation gauge, the core personal consumption expenditure index published on Friday, rose about 3.1% in April from a year before, which exceeded the expectations.

Gold and crypto have been deemed as hedges regarding the increasing prices, with crypto bulls in few cases championing bitcoin as a modern-day replacement for bullion. Inflation aims to protect the investor against the decrease in purchasing power of money because of the surge.

Gold prices have increased nearly $200 since the start of April to hit a four-month high, by a weakening U.S. dollar and high demand on the back of increasing inflation expectations.

Whereas cryptocurrencies have been on a wild ride, Bitcoin, for example, is up over 25% in 2021 but down over 25% from the last three months.

On Tuesday, Currie said investors should not see digital currencies as a substitute for gold when looking at inflation hedges while speaking to CNBC.

“You look at the correlation between bitcoin and copper, or a measure of risk appetite and bitcoin, and we’ve got ten years of trading history on bitcoin; it is a risk-on asset,” Currie says. He also said that bitcoin and copper act as “risk-on” inflation hedges, compared with gold, which is seen as a haven or “risk-off.”

Copper surged to all-time highs in the middle of May before seeing a huge decline toward the month-end, only to rebound again in the previous week.

“There is good inflation, and there is bad inflation. Good inflation is when demand pulls it, and that is what bitcoin hedges, that is what copper hedges, that is what oil hedges,” Currie added.

“Gold hedges bad inflation, where supply is being curtailed, which is focused on the shortages on chips or commodities, and other types of input raw materials. And you would want to use gold as that hedge,” Currie added.

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