Why stock market, gold price, Bitcoin price moving in one direction — explained

Stock market vs gold price vs Bitcoin price: After climbing to a new lifetime high, shar selling was witnessed across sectors in the Indian stock market. However, to the surprise of the investors, gold price and Bitcoin prices too witnessed selling pressure in the week gone by. According to experts, the Indian stock market witnessed selling pressure due to the ‘shar test’ being suggested by the mutual funds’ body AMFI to the AMCs after the market regulator SEBI raised concern over the froth building up in the small and mid-cap stocks. They said that global cues also went negative after the hotter-than-expected US CPI and PPI print for February 2024. This dragged key benchmark indices, which include large-cap quality stocks as well. The disappointing US inflation data put down the probability of a near-term US Fed interest rate cut that dragged gold prices. They said that the decentralized digital currency market lacked a clear outlook after the weak macroeconomic developments amid rising geopolitical tension in the Middle East. This triggered profit booking in Bitcoin holdings.

Triggers for gold, equity, and Bitcoins

On reasons for the synchronized movement of the stock market, gold, and Bitcoin prices, Sathvik Vishwanath, Co-Founder & CEO at Unocoin said, “Historically, these assets have often moved independently of each other due to their different characteristics and drivers. Gold is traditionally considered a safe-haven asset that is sought after in times of economic uncertainty or inflation. Stocks, on the other hand, represent ownership stakes in companies and are influenced by factors such as company earnings, economic growth, and investor sentiment. Meanwhile, Bitcoin, a decentralized digital currency, has been touted as both a store of value and a speculative asset. However, in recent market conditions, observers have noted a surprising correlation between these seemingly disparate assets.”

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“Several factors may contribute to this phenomenon. For example, macroeconomic events such as central bank policy, geopolitical tensions, and the global economic outlook could affect investor behavior across different asset classes. Additionally, the rise of algorithmic trading and the increasing integration of financial markets could strengthen correlations between assets. In addition, the narrative surrounding inflation concerns and the search for alternative stores of value amid unprecedented monetary stimulus may drive investors toward gold, stocks, and bitcoin at the same time. Whatever the underlying reasons, understanding the dynamics of this convergence could provide valuable insights for investors navigating today’s complex financial environment,” the Unocoin expert added.

Edul Patel, CEO of Mudrex said, “Gold, Equities, and Bitcoin are all moving together because of several different reasons. However, one common thing was that investors were anticipating the Federal Reserve interest rate cuts. But when US inflation rose to 3.2% which is higher than expected, it affected these assets as the market tends to react much to unexpected things. Before the US inflation data came out, all these assets were doing well. While short-term fluctuations may occur, investors tend to return to the market after assessing the broader economic landscape.”

Asked about the reasons that forced Bitcoins to follow equity and gold price movement, Anuj Gupta, Head — Commodity & Currency at HDFC Securities said, “It was liquidity and momentum that fueled these assets together. Bitcoin prices followed an uptrend after the boost in demand for Bitcoin ETF as the majority of the global central banks were buying gold. This triggered demand for Bitcoin in the decentralized digital currency market. However, hotter-than-expected US CPI data followed by the weak PPI print put a dent on the US Fed interest rate hike buzz in the near term.”

Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.