Gold Vs. Bitcoin: Gold Outperforms as BTC Tests Long-Term Support

Bitcoin (BTC) remains under pressure as the price trades near the long term support zone. There is an interesting correlation in WTI oil, gold (XAU) and Bitcoin prices after the U.S.-Iran war. It is observed that oil prices surged higher from around $70 to $120 during the first phase of the war. This surge in oil put pressure on gold prices toward the $4,100 region, while Bitcoin prices consolidate around the long term support zone.

But when the two-week ceasefire was announced on 7th April, oil prices dropped, which kept gold prices consolidated in the neutral zone. But oil prices have been falling since 19th May toward the pre-war levels. This pressure has kept the gold and Bitcoin in bearish mode. But Bitcoin faces deeper pressure than gold, as seen in the chart below. The gold price dropped by 5% over the past 30 days while bitcoin’s drop exceeded 17%.

But gold prices have already hit the long-term support of $4,000 and are now rebounding toward the $4,350 resistance area. But the Bitcoin price still remains under pressure and looks to find support before the next rally.

Bitcoin Tests Long-Term Support Near $50,000

The Bitcoin price has been trading within the long-term ascending channel pattern since the lows of December 2018. The price has formed a cup and handle pattern from the peak of March 2021 to the recent highs. The cup of this pattern was formed from 2021 to 2024, while the handle pattern is now under construction.

The breakdown in Bitcoin price below the 50 SMA on the weekly chart indicates strong uncertainty in the short term.

The BTC price is now challenging the long-term support at the 200 SMA on the weekly chart in the $50,000 to $60,000 region. A break below $50,000 will likely push BTC prices toward $40,000 to $35,000.

On the other hand, a break above $100,000 is required to keep the bullish momentum in Bitcoin market. The recent consolidation around $50,000 indicates price uncertainty as the market looks for the next move.

Bear Flag Breakdown Signals Short-Term Pressure in BTC

The strong bearish price action in the short term was discussed multiple times in the previous analysis. The chart below shows the formation of bear flag patterns from the recent highs of the $125,000 area. The price broke below the second bear flag pattern which supports the bearish pressure in the short term.

Now the price has already hit $59,000 and is consolidating around the red zone. A break below $60,000 will likely initiate another drop toward the $50,000 area. But the strong support in the Bitcoin market may trigger strong rallies from the long term support of $50,000. A break below $50,000 will open the door for a deeper correction to $35,000.

Overall, the $35,000 to $50,000 zone remains the long-term support zone in the Bitcoin market, which may trigger strong rallies.

Gold-to-Bitcoin Ratio Signals Gold Outperformance

The weakness in the Bitcoin price is also confirmed by the gold-to-Bitcoin ratio. The ratio rebounded in May and June toward 0.08. The 0.08 level is a strong resistance level.

If the ratio breaks above 0.08, it will likely keep Bitcoin under pressure and initiate strong surge in the gold market. But as long as the ratio trades between 0.05 and 0.08, it will likely form a consolidation pattern in both the Bitcoin and gold markets around their key support zones.

Since the ratio has already broken the descending channel pattern, the outlook has shifted to the upside. This breakout points to further strength in the gold market in the medium to long term.

Bitcoin-to-Gold Ratio Points to Further BTC Weakness

The Bitcoin-to-gold ratio also points to a similar situation. The ratio peaked at 18 but triggered a strong drop in June. Now the ratio is consolidating between the 13 and 18 levels and looking to find the next move.

The red highlighted zone in the ratio indicates the key zone. As long as the ratio remains below this red zone, the possibility of a drop toward the 9 level is high.

If the ratio drops toward the 9 level, Bitcoin prices will likely drop further toward the $50,000 or $35,000 level before the next rally.

What is Next for Bitcoin and Gold?

Bitcoin remains in a critical decision making stage as the price consolidates near the major support level of $50,000 to $60,000. The weekly 50 SMA breakout and the bear flag pattern continue to put pressure on BTC in the short term. If the price drops below $50k, it could continue its decline to $40k-$35k before next big surge starts. But if the market stabilises, this long-term support area could also draw in buyers.

In the medium term, gold appears better placed to outperform Bitcoin as the gold-to-Bitcoin ratio has already reversed its long-term downtrend. If this ratio breaks above 0.08, it will signify additional strength for gold and additional pressure for bitcoin. So, gold could further outperform bitcoin until BTC finds support and rallies back to $100,000.

Read more: BTC Tests $60K as Ratio Signals More Risk