Gold’s Rally Pauses as Risk Appetite Shifts
Gold’s impressive eight-week winning streak came to an abrupt halt this week, with spot prices falling more than 6% from Monday’s record high above $4,380 per ounce. By the weekend, the metal had settled around $4,120, marking its first weekly decline in two months. The pullback wasn’t entirely unexpected—traders had been taking profits ahead of the Federal Reserve’s upcoming policy decision, and heavy outflows from gold ETFs suggested institutional money was moving elsewhere.
What’s interesting is how quickly the narrative shifted. For weeks, gold had been the go-to safe haven as trade tensions between the US and China escalated. But then officials from both countries announced they’d reached a “preliminary consensus” on key trade issues. US Treasury Secretary Scott Bessent went so far as to say the threat of 100% tariffs on Chinese goods was “effectively off the table.” That declaration, combined with expectations that the Fed will cut rates by another 25 basis points this week, took the wind out of gold’s sails.
Bitcoin Finds Its Footing
While gold was retreating, Bitcoin was quietly gaining ground. The cryptocurrency added over 5% in the past week, pushing back above $113,500 and breaking out of a narrow trading range that had persisted for about a month. This divergence between gold and Bitcoin is noteworthy because for most of the quarter, Bitcoin had been lagging behind the precious metal.
The timing of Bitcoin’s move might not be coincidental. When investors feel less need for safe havens, they often rotate back into riskier assets. Bitcoin, with its higher volatility and growth potential, fits that description. The softer macro backdrop—reduced trade tensions and anticipated Fed rate cuts—seems to be creating conditions where investors feel comfortable taking on more risk.
The BTC/Gold Ratio Signals Opportunity
Technical analysts have been watching the BTC/gold ratio closely, and last week it reached its most oversold level in nearly three years. The ratio’s 14-day Relative Strength Index dropped to 22.20, which is well below the typical oversold threshold of 30. Historically, when this ratio gets this stretched to the downside, it often marks a local bottom for Bitcoin.
This pattern makes some sense when you think about market psychology. When fear dominates, money flows into gold. When that fear subsides, some of that money tends to rotate back into assets with more growth potential. Bitcoin, despite its maturation, still behaves like a risk-on asset in many respects.
Looking Ahead to Fed Week
All eyes are now on the Federal Reserve’s meeting this week. Another 25 basis point rate cut is widely expected, which would continue the central bank’s easing cycle that began earlier this year. Lower interest rates typically weaken the US dollar and make assets like gold and Bitcoin more attractive to hold.
But here’s where it gets tricky. If the Fed signals that this might be the last cut for a while, or if their economic outlook is more optimistic than expected, we could see another shift in sentiment. Gold might resume its climb if uncertainty returns, or Bitcoin could extend its gains if risk appetite continues to improve.
What’s clear is that the relationship between these two assets remains fluid. They’re not always inversely correlated—sometimes they move together, sometimes they don’t. But this week’s divergence suggests that for now, at least, investors are feeling confident enough to venture back into riskier waters.
