Why are gold and bitcoin rising together?

In the first six months of 2026, gold and bitcoin were the worst performing investments in a balanced portfolio. Since the start of the summer, they have been the best. Bitcoin has risen from $60,000 to $80,000 since July. Last week alone it jumped by 20%. Gold, meanwhile, has risen by 15% in August.

This is odd. Gold is the archetypal safe haven. Bitcoin is a high-octane speculative asset. So why are they suddenly moving together?

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They are very different assets, albeit with some shared characteristics, but recently they have both been responding in the same way to the same underlying anxiety - an erosion of confidence in US policy making and the twin pillars of the global financial system, the dollar and US Treasury bonds.

Both remain well off their recent highs, so part of this is just recovery from a weak second quarter. But their performance is in stark contrast to a summer of drift for shares and bonds. There is more to this than a rebound.

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The issues underpinning this latest flight to alternative investments are not new: the fiscal trajectory of the US and other developed economies, the uncontrolled deficits, an unwillingness to cut spending or pay for it with higher taxes, have been around for years.

Investors were happy to park those fears while they succumbed to the siren call of AI. The cooling of that story is part of the explanation for the resurgence of gold and bitcoin. The hot money chasing the AI picks and shovels trade in the spring is now looking for a new home.

But there are other reasons why they should have picked up some of the slack. Falling real interest rates are part of it. Neither asset pays an income, and rising real rates reduce their appeal. Weaker US economic data and reduced expectations of further Fed tightening have lowered the opportunity cost of holding the precious metal.

A depreciating dollar has helped too. Gold has historically tended to move inversely to the US currency, and the latest bout of dollar weakness has reinforced the debasement trade.

Fiscal anxiety has also ratcheted up over the summer, as Scott Bessent’s increasingly inventive interventions to support Treasuries have reminded investors that a peace-time government with a war-time debt burden is one that cannot live with persistently higher borrowing costs. Just two decades ago, the US national debt stood at $6trn. Today it is $40trn, four times as high after adjusting for inflation.

Governments that won’t spend less and can’t tax more have limited options: it is hard for them to avoid the temptation to let inflation run hot while leaning against the consequent rise in borrowing costs. It reduces the real burden of their debts. It is catnip to a gold bug.

The fourth reason not to be surprised by gold’s rise is geo-politics. Shifting the fight to the economic front again is a tacit admission that the military option has been exhausted in the Gulf. There are no simple solutions anymore, which adds a conventional safe-haven argument to the monetary and fiscal ones.

Finally, central banks continue to use gold to diversify their reserves from freeze-able dollars to an asset that is no-one’s liability. They bought nearly 300 tonnes of gold in the second quarter, adding to years of heavy government purchases of the metal.

Bitcoin shares some of these same drivers. It benefits from dollar weakness, fears about monetary debasement and a lack of confidence in conventional assets. But it has some unique impetus too.

Firstly, crypto is more accessible than it used to be. Bitcoin ETFs move the asset class further into the mainstream. Last week saw five consecutive days of inflows.

Then there is a friendlier regulatory backdrop. Washington is moving towards giving crypto a clear legal rule book. That reduces the risk that governments can make owning or trading it prohibitively difficult. A good old-fashioned short squeeze has been the icing on the cake.

What is most interesting about this summer’s surprise winners is not that gold and bitcoin have risen but that they have both surged at the same time. They usually behave differently, but they do share a common characteristic. Neither is a claim on a company or a government. A share requires a company to make a profit. A bond needs a borrower to repay you. A bank deposit is someone else’s liability. Gold and bitcoin are different. Their simultaneous rise is a reflection of investors’ increasingly cautious view of conventional assets.

US government debt held by the public is likely, by the end of the decade, to exceed the 106% of GDP reached at the end of the Second World War; inflation has been above the Fed’s target for five years; long bond yields are pushing ever higher and the Treasury is bearing down on the long-end of the yield curve.

You don’t have to be a cynic to view this as a move to fiscal dominance - interest rate and tax policy working together to accommodate a government that cannot comfortably refinance itself at high real interest rates. The market is assuming that if the Treasury wants to keep yields down it will have to significantly increase the size of its interventions. The Fed may have to join in too, keeping interest rates lower than they should be. It is the primrose path to debasement.

A combination of loose fiscal and loose monetary policy is a one-way street for the dollar and a tailwind for both gold and bitcoin. It is not hard to see why investors should be prepared to pay more for assets whose value is not dependent on the willingness or ability of an indebted government to repay the kindness of strangers.

There are risks in holding both gold and bitcoin - in terms of opportunity cost and volatility. But increasingly these look preferable to the risks of not holding at least some of them in your portfolio.

This article was originally published in The Telegraph.

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