Why are central banks choosing gold over Bitcoin? Peter Schiff revives debate amid record bullion buying

Economic Times

5 days ago

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Volatility still haunts crypto, strengthens gold's case
Dollar volatility keeps precious metals in focus
Central banks around the world are stockpiling gold at a record pace and eschewing Bitcoin, and that speaks volumes about the future of money, according to economist Peter Schiff. In a pointed post on microblogging site X, the outspoken gold advocate reignited the debate over bullion versus crypto, questioning why global monetary authorities are turning to the yellow metal as they hedge against a post-dollar world.Schiff's remarks come amid a sustained surge in central bank gold buying, with institutions now purchasing over 1,000 metric tons of gold annually — more than double the historical average of the past decade, according to a Reuters report. The economist, a long-standing critic of cryptocurrencies, said this trend reflects deepening distrust in the U.S. dollar and reinforces gold's time-tested status as a resilient reserve asset.In a separate post, Schiff added, "The Dollar Index had its lowest weekly close in over three years, 30-year Treasuries had the lowest weekly close in almost two years, and gold had its highest weekly close ever. The world is divesting of U.S. dollars and bringing their money home to buy gold and invest locally."The move toward gold accumulation is not new. Countries like Russia have been steadily adding to their gold holdings since 2014, as a shield against Western sanctions and increasing geopolitical isolation. Schiff pointed to this example as a blueprint that other emerging markets are now following, especially in the wake of former President Donald Trump's tariff-heavy trade policies, which continue to generate global unease about the long-term stability of the U.S. dollar."If Bitcoin is the future, why are central banks betting on gold to replace the dollar?" Schiff added, stressing his argument that despite the rise in Bitcoin's price, which recently touched $108,148, central banks have yet to embrace the asset as a reliable store of value.Gold's appeal has been bolstered by rising geopolitical risks, volatility in global bond markets, and persistent uncertainty around U.S. fiscal policy. In contrast, Schiff argues that Bitcoin remains plagued by price instability and limited institutional trust. "Gold has proven itself as a safe asset during periods of tension," he noted, pointing to its performance across multiple economic cycles and financial crises.Gold prices saw a modest retreat on Tuesday. Spot gold dipped 0.5% to $3,325.99 an ounce as of 05:37 GMT, while U.S. gold futures fell 1.2% to $3,325.70 amid a rebound in the U.S. dollar index. In India, June gold futures opened slightly higher at Rs 96,050 per 10 grams, a Rs 5,160 gain from the mid-May low of Rs 90,890.Despite the dip, analysts believe gold remains underpinned by broader macro risks. Manoj Kumar Jain of Prithvifinmart Commodity Research said, 'Weakness in the dollar index, geopolitical tensions, and global uncertainty are supporting safe-haven buying for precious metals.' He added that gold could find support near $3,200 per troy ounce in the coming sessions.Rahul Kalantri, VP Commodities at Mehta Equities, said investors are cautious ahead of key U.S. data releases, including the FOMC minutes on Wednesday and PCE inflation data on Friday. 'A widening U.S. deficit and geopolitical tensions continue to support gold, especially as markets weigh the Fed's interest rate outlook,' he noted.As central banks signal their long-term strategy through their bullion buying spree, Schiff's challenge to Bitcoin advocates hangs in the air: If crypto is indeed the currency of the future, why are governments still choosing gold?(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)