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From Bullion to Bitcoin: Study Shows Gold and Crypto Belong Together

Gold has been around for centuries, while crypto only recently burst onto the scene. How are investors using them in portfolios today — and what makes them distinct (yet complementary) assets?

December 12, 2024 7 min read

A Tale of Two Investment Trends: Gold Versus Crypto

Gold has a long, illustrious history. Its role in commerce dates back thousands of years: Lydians minted it into coins, ancient China traded gold ingots, and entire financial systems were based around the precious metal.

Crypto, by contrast, has a far shorter chapter in history books — with bitcoin, the first digital currency, launching in 2008. Yet, after an explosive emergence and widespread recognition as a newfound store of value, bitcoin was frequently likened to gold, even earning the nickname “digital gold” for its perceived similarities.

Could this explain why both gold and crypto have experienced a surge in adoption since March 2023? The percentage of high net worth (HNW) investors holding gold has increased from 20% to 38% — a 90% jump in only 15 months.¹ Crypto climbed steadily in the same timeframe. Today, 31% of HNW investors hold the asset, a nearly 50% increase.²

But despite their titular ties and twin trajectories, these two assets are not interchangeable. For starters, almost one-quarter (23%) of HNW investors hold gold and crypto. In fact, our latest research underscores that investors and advisors increasingly view these assets as distinct, yet complementary, components of a diversified portfolio.

Stability Meets Growth: The Roles of Gold and Crypto in Investor Portfolios

We live in an information-driven world, where answers to most questions are a few keystrokes away. But a natural consequence of this reality is a temperamental financial market — one that constantly hungers for the next big innovation, while anxiously bracing for the next unforeseen headwind.

Within this context, perhaps dual adoption shouldn’t come as a surprise. Gold is traditionally known for stabilizing portfolios — for instance, a 10% portfolio allocation to gold has cushioned the blow of recent drawdowns by 154 basis points on average.³

Crypto, on the other hand, has faced seismic volatility in its short history, with an almost routine cadence of new highs, retractions, and rebounds. Yet, this market continues to regain its footing, due in large part to the undeniably revolutionary attributes of blockchain technology.

Our study findings reinforce these identities. Among investors who hold both gold and crypto, gold most often serves as a safe haven* and hedge against various market forces (Figure 1). Meanwhile, the majority of respondents use crypto for exposure to growth potential and technological innovation.

Interestingly though, investors see long-term growth potential in both gold and crypto (Figure 2).

Advisors share a similar perspective. According to our study, 58% of advisors associate crypto with high growth, while 46% see it as a tool for portfolio modernization and diversification. And in the same vein, almost half of advisors primarily value gold as a portfolio stabilizer. But, like investors, advisors see both gold and crypto as growth-oriented investments (Figure 3).

This suggests that these assets may be working individually (but cohesively) to meet immediate and future financial goals.

Figure 3: Top Five Reasons Advisors Recommend Gold and Crypto

Gold		Crypto
Diversification	49%	High-growth potential	58%
Long-term growth	46%	Portfolio modernization	46%
Hedge against inflation	42%	Diversification	46%
Protection against deflation	40%	Early adoption advantage	42%
Safe-haven asset*	40%	Global accessibility/decentralization	39%
		Exposure to innovative technology	39%

Source: State Street Global Advisors, 2024 Gold ETF Impact Study, data collected July and August 2024. Question asked: Why do you recommend investing in gold to clients? (Recommend Gold at Least Rarely: 298); Why do you recommend investing in crypto/bitcoin to clients? (Recommend Crypto/Bitcoin at Least Rarely: 280)

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Why the Future Seems Bright for Gold and Crypto

Gold and crypto are often used as solutions to different short-term needs, but both assets are valued for their long-term possibilities. This perception may stem from several factors.

Gold: Resilience and Diversification

Because gold has historically demonstrated low correlation with equities and bonds, gold tends to behave independently from other major asset classes. This can help reduce overall portfolio risk — especially during periods of volatility.

Over the past 30 years, gold’s correlation with global equity markets like the US and Japan has ranged from near zero to negative (Figure 4); its highest correlation with fixed income (0.32 to US investment-grade bonds) is also relatively low (Figure 5).

Moreover, gold boasts a strong track record during systemic market shocks and tail events, regardless of the catalyst (financial crises, geopolitical tensions, economic downturns, liquidity issues, etc.).

When markets experience major drawdowns, gold has outperformed equities in most cases. Since 1987, during peak-to-trough drawdowns greater than 15% on the S&P 500® Index, gold delivered an average return of 5.83%, compared to a total return of -24.19% for the S&P 500. Gold posted positive returns in 9 out of 13 of these events.⁴ Even in the few instances of negative returns, gold still reduced portfolio drawdowns and helped mitigate volatility compared to portfolios without gold.

So it appears investors are wise to value the long-term potential of this precious metal. The ability to hedge against market volatility and persistently low correlation to both equities and fixed income⁵ can potentially make gold a compelling portfolio play.

Crypto: Achieving Stability and Innovation

In its early years, crypto was rightfully regarded as a speculative and highly volatile asset class. For instance, bitcoin’s price soared by over 1,300% in 2017, only to crash by 73% the following year.⁶ In 2020, the bitcoin rally renewed, gaining 300%, followed by another 60% bump in 2021, a 64% loss in 2022, and a 156% rebound in 2023.⁷

But crypto isn’t as unpredictably combustible as it once was. The market is maturing, regulatory barriers are falling, and volatility is subsiding — over the past seven years, bitcoin’s volatility has trended downward, to a point where its risk profile mirrors those of major tech stocks like Meta and Amazon.

While early investors jumped aboard the crypto bandwagon (or express train) hoping for quick gains, many of today’s investors are drawn to its longer-term impact on industries like healthcare, finance, real estate, and logistics. Blockchain technology has influenced this shift, with innovations ranging from decentralized data security for private health information to the tokenization of private market investments.

Institutional investors are also warming up to crypto exposure, thanks to availability of traditionally regulated investment products. Roughly 6 in 10 institutional investors now prefer registered vehicles to access crypto, such as exchange traded products and mutual funds, according to an EY report.⁸ And over half of surveyed institutions plan to invest in blockchain-related funds within the next two to three years — a clear vote of confidence in blockchain technology’s long-term growth prospects.

Shining Brightly, Together

Gold and crypto can be difficult to categorize. There are mixed opinions on whether these assets are principally commodities, currencies, or alternative investments. Classification ambiguity aside, it’s evident that gold and crypto play distinct yet harmonious roles in investor portfolios.

Crypto exposure can help investors capture the upside of technological innovation, with some inherent volatility as a tradeoff. Conversely, gold has been (and still is) valued as a stabilizer — a 2% to 10% allocation to gold may support portfolios, tactically and strategically, regardless of market conditions.

But these assets do share a commonality: today’s investors are increasingly using both to pursue diversified, long-term growth.

Keep Pace with the Latest Gold Trends

Want more insights like these? Dig into our 2024 ETF Gold Impact Study to learn more about the role gold plays in today’s portfolio.

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Glossary

Bitcoin
A peer-to-peer digital currency created in 2009 that offers the promise of lower transaction fees than traditional online payment mechanisms. Unlike government-issued currencies, bitcoin is run and ‘regulated’ by its own users using an infrastructure called “blockchain.” Bitcoin was created by someone whose identity has not yet been verified who goes by the name of Satoshi Nakamoto.

Blockchain
A term related to bitcoin referring to the public ledger of all bitcoin transactions that have ever been executed. Blockchains are constantly growing, as completed ‘blocks,’ or transactions, are added in a linear, chronological order. Every computer connected to the bitcoin network gets a copy of the blockchain which, in theory, makes the whole system more secure as more computers, or “nodes,” become part of the blockchain.

Bloomberg Barclays US High Yield Corporate Bond Index
The Barclays U.S. High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. The index includes both corporate and non-corporate sectors.

Bloomberg Barclays US Treasury Bond Index
A benchmark of US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index.

Bullion
A term used to describe physical gold or physical silver that is at least 99.5 percent pure.

Bund
The German government’s federal bond. The bund is issued to the public as a way for the German government to finance its spending. Bunds are like Treasury bonds in the U.S. They are government-backed instruments of the highest quality.

Correlation
The historical tendency of two investments to move together. Investors often combine investments with low correlations to diversify portfolios.

Diversification
A strategy of combining a broad mix of investments and asset class to potentially limit risk, although diversification does not guarantee protecting against a loss in falling markets.

Equities
An instrument that signifies an ownership position, or equity, in a corporation, and which represents a claim on its proportionate share in the corporation’s assets and profits.

Exchange Traded Fund (ETF)
An ETF is an open-ended fund that provides exposure to underlying investment, usually an index. Like an individual stock, an ETF trades on an exchange throughout the day. Unlike mutual funds, ETFs can be sold short, purchased on margin and often have options chains attached to them.

Financial Crisis, or Global Financial Crisis (GFC)
The economic upheaval of 2007-2009 that is generally considered the largest downturn since the Great Depression of the 1930s. The GFC was triggered largely by the sub-prime mortgage crisis that led to the collapse of systemically vital US investment banks such as Bear Stearns and Lehman Brothers. An aggravating factor was the speculative spike in energy that lifted oil prices to almost $150 a barrel in the summer of 2008, and which surely contributed to the economic slowdown. (See Great Recession).

Fixed Income
A type of investing, usually involving bills, notes or bonds, for which real return rates or periodic income is received at regular intervals and at reasonably predictable levels. Fixed income can also refer to a budgeting style that is based on fixed pension payments.

Investment-Grade Credit
A fixed-income security, such as a corporate or municipal bond, that has a relatively low risk of default. Bond-rating firms, such as Standard & Poor’s, use different lettered descriptions to identify a bond’s credit quality. In S&P’s system, investment-grade credits include those with ‘AAA’ or ‘AA’ ratings (high credit quality), as well as ‘A’ and ‘BBB” (medium credit quality). Anything below this ‘BBB’ rating is considered non-investment grade.

MSCI World Index
The MSCI World Index is a free-float weighted equity index. It includes about 1,600 stocks from developed world markets, and does not include emerging markets.

MSCI ACWI Index (or MSCI All Country World Index)
A free-float weighted global equity index that includes companies in 23 emerging market countries and 23 developed market countries and is designed to be a proxy for most of the investable equities universe around the world.

MSCI EAFE Index (or MSCI Europe, Australasia, Far East Index)
An equities benchmark that captures large- and mid-cap representation across 22 developed market countries around the world, excluding the US and Canada.

MSCI Emerging Markets Index
The MSCI Emerging Markets Index captures large and mid-cap representation across 23 emerging markets countries. With 834 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI Japan Index
A benchmark designed to measure the performance of the large- and mid-cap segments of the Japanese equity market.

Recession
A contraction in economic activity as profits decline and consumer expectations begin to bottom out that typically leads to accommodative monetary policy. Recessions have been characterized as at least two consecutive quarters of economic contraction, but definitions vary and the concept is subjective.

Russell 2000® Index
A benchmark that measures the performance of the small-capitalization segment of the U.S. equity universe. The Russell 2000® is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes about 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000® Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.

S&P 500® Index
A popular benchmark for U.S. large-cap equities that includes 500 companies from leading industries and captures approximately 80% coverage of available market capitalization.

Volatility
The tendency of a market index or security to jump around in price. Volatility is typically expressed as the annualized standard deviation of returns. In modern portfolio theory, securities with higher volatility are generally seen as riskier due to higher potential losses.

Footnotes

Disclosure

Important Risk Information

This communication is not intended to be an investment recommendation or investment advice and should not be relied upon as such.

The views expressed in this material are the views of State Street Global Advisors through the period ended December 4, 2024 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Investing involves risk including the risk of loss of principal.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

All the index performance results referred to are provided exclusively for comparison purposes only. It should not be assumed that they represent the performance of any particular investment. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.

This communication is not intended to be an investment recommendation or investment advice and should not be relied upon as such.

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