Has Gold lost its essence? A debate that will redefense investment crypto portfolios

Let me say this upfront: I think the claim that gold is "turning into Bitcoin" is both provocative and dangerously oversimplified. But after reading Robin Brooks' recent analysis, I cannot dismiss it outright. The economist makes a compelling case that the world's oldest safe haven is behaving less like a refuge and more like a risk asset. In my view, this debate is not academic — it has real consequences for how we build resilient portfolios.

So, has gold lost its essence? Let me walk you through the evidence, the counterarguments, and ultimately, my own conclusion.

The empirical case for a changing Gold

Brooks' argument rests on observable market dynamics. He presents data showing that the correlation between gold and the S&P 500 has risen sharply in recent years, surpassing 0.50. Historically, gold maintained a near‑zero correlation with equities, making it an ideal diversifier. Under current conditions, however, gold tends to move in the same direction as stocks — rising during risk‑on environments and falling during selloffs.

Brooks further notes that gold has broken its traditional inverse relationship with U.S. Treasury bonds. In prior decades, rising real bond yields typically weighed on gold prices. Yet recent data show gold appreciating even as real yields turned positive and increased. This decoupling suggests that new, possibly speculative, forces are driving price discovery.

The diagnosis is unambiguous: gold now exhibits procyclical, high‑beta characteristics — a description that closely mirrors Bitcoin. Brooks attributes this transformation to the influx of a new cohort of retail investors, drawn by the "devaluation trade" narrative, who trade gold with the same behavioural patterns they apply to cryptocurrencies.

What brooks gets right — And where i disagree

I will admit: the correlation data is uncomfortable. Any honest investor should acknowledge that gold no longer offers the same diversification benefits it once did. But to conclude that gold has "lost its essence" is, in my opinion, to confuse a cyclical phenomenon with a structural change.

Let me highlight three reasons why I remain sceptical.

1. Look at the 2025 returns. Last year, gold rallied approximately 65% — a historic run. Bitcoin fell by roughly 6%. Correlation measures direction, not magnitude. Two assets can move together 60% of the time, but if one appreciates 65% and the other depreciates 6%, they are not interchangeable. Gold's exceptional performance in 2025 underscores a persistent structural demand that Bitcoin simply did not share.

2. Central banks are not buying the narrative. While analysts debate on social media, the most conservative institutions on the planet have accumulated more than 1,000 metric tonnes of gold annually for four consecutive years. China, Russia, India, and Turkey are leading these purchases. Do I believe that central bankers — with their armies of econometricians — would pile into an asset they considered procyclical and high‑beta? I do not. For them, gold remains the only monetary reserve that is no one else's liability.

3. There is a more elegant explanation. Economists such as Daniel Arráez and analysts at JPMorgan argue that gold and Bitcoin are not converging in nature, but rather responding to the same macroeconomic factors: rising public debt, monetary expansion, and currency debasement fears. Under this view, the increased correlation is a symptom of a unique regime, not a permanent change in gold's character. That, to me, is far more convincing.

Where I stand

Let me be direct: declaring the "death of gold as a safe haven" is an overstatement. But ignoring its altered behaviour would be equally imprudent. Gold is not what it was twenty years ago. Its greater sensitivity to speculative flows and its higher correlation with equities are real. For retail investors buying gold through ETFs or digital platforms, that transformation is tangible.

So here is my opinion, plain and simple:

• Do not abandon gold. It still offers institutional demand, unmatched liquidity, and zero counterparty risk.
• But do not treat it as an unconditional safe haven. If your goal is protection against a broad market crash, diversify with short‑term Treasury bonds or cash. Gold no longer provides the same insurance it once did.
• If you believe in the devaluation thesis, then Brooks is right on one crucial point: today, gold and Bitcoin compete on overlapping terrain. Know the risk‑return profile of each before you bet.

Gold has not lost all its traditional essence — but it has lost enough that no prudent investor should take its safe‑haven status for granted. Financial wisdom consists of adapting to evolving markets, not clinging to outdated dogma. Even when that dogma shines like the most precious metal in history.