Gold has been a medium of exchange for thousands years with an indisputable store of value, which, however, yields no return and has a high opportunity cost compared to assets such as bonds or equities. On the other hand, the Internet Age has brought about a fierce competitor, known as bitcoin. Since its launch in 2009, the digital currency has been in the middle of attention, whether because its value declined close to the $240 level, after having surpassed the $1,000 milestone in 2013, or because regulatory agencies are trying to figure out whether a sustainable regulatory environment should be fostered.
What Drives the Value of Gold?
The value of gold is driven by its converse relationship to inflation. Since the collapse of the Bretton Woods monetary regime in August 1971, which temporarily suspended the convertibility of the U.S. dollar into gold, gold has been widely used as a hedging tool against inflationary pressures as well as a tool to lower public debt and boost export growth.
Since 2013, inflation has been preventing gold from rising as shown in the chart below, but the two indicators are moving towards the same direction. In spite of the latest strong narrative about