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By Hamza Shaban
This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
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The White House calmed the rolling boil of China tensions down to a simmer, but one asset that remained scorching was gold.
Political instability, the "debasement" of fiat currencies, and rising debt loads have all fueled gold's historic rally this year. But the latest market meltdown — and subsequent comeback — has reinforced the precious metal's standing as the safe haven of choice. That's because this week's tandem recovery in stocks and in the prices of cryptocurrencies offered another lesson: a divergence between gold and digital assets.
The rebound on Monday came as suddenly as the sell-off. Trade tensions with China that had soured a holiday weekend for many US investors have tempered. After threatening to impose an additional 100% tariff on China, President Trump relaxed the situation, putting out a fire he had appeared to spark and replaying the stock chart theatrics of April's tariff drama.
While bitcoin stumbled and lesser altcoins convulsed, gold performed like a refuge.
Read more: Thinking of buying gold? Here's what investors should watch for.
But is that an indictment of the cryptocurrency or just an acknowledgment of how it differs from legacy hedges and safer bets?
Part of crypto's volatility (and its attractiveness) is its 24/7 trade window. While Wall Street had to sit and stew with the China escalation, crypto traders ran with it, or rather, ran from it. Panic provoked more panic, prompting a cascade of selling.
While the varying market dynamics between crypto, stocks, and gold make it harder to compare how they all would have behaved under the same conditions, what's clear is that crypto investors chose to sell when things started to look bad.
Bitcoin shed roughly 10% over the course of a bruising stretch of trading, dropping from $122,000 to as low as $109,000, with the rest of the crypto world dragged alongside it. The furious selling shrank the overall market cap of cryptocurrencies by hundreds of billions of dollars, according to data from CoinMarketCap.
Prior to the Beijing dust-up, bitcoin set a new high. In contrast, the US dollar index (DX.Y.NYB) had lost nearly 9% for the year. And long-dated Treasury yields have remained high, signaling what many crypto backers have envisioned as a grand reordering. The world's reserve currency may not suddenly shift from the greenback. More people, however, would understand and accept that digital currencies are a store of value with staying power.
But for that to be true, the crypto charts can't just trace and amplify the broader direction of the stock market. A wager with bigger returns and heavier falls feels less like a financial shelter than a parlay.
Economic uncertainty bolstered gold and crypto's position. When the going was good (which is to say "bad" because of perceived global instability), gold and crypto both shined. What's more illuminating, perhaps, is that, in a moment of distress without the cover of a rising stock market, the two diverged.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.