Gold vs. Bitcoin: How Liquidity Stress and Market Warnings Are Shaping the Next Move?

Recent warnings from top banking executives have reignited fears of a market correction. At the Global Financial Leaders’ Investment Summit in Hong Kong, Morgan Stanley CEO Ted Pick and Goldman Sachs CEO David Solomon both warned that sharp market drawdowns are likely. JPMorgan CEO Jamie Dimon had previously raised concerns about market risks. He warned that investors are not taking the threat of a steep correction in US equities seriously.

Investor sentiment is turning cautious just as gold (XAU) and Bitcoin (BTC) respond in markedly different ways. Although both assets are viewed as safe havens during periods of stress, their recent price movements show clearly diverging responses to current market conditions.

Bitcoin Weakens Under Liquidity Stress and Tightening Financial Conditions

Bitcoin has broken below the $110,000 support level and is now consolidating near the key $100,000 zone. The break below $110,000 signals a bearish trend. However, a drop below $100,000 is needed for further confirmation. This decline in Bitcoin aligns with rising signs of liquidity stress across the broader financial system.

The chart below shows that Bitcoin has reached short-term support at $100,000 within the symmetrical broadening wedge. However, continued pressure suggests that a break below this level could trigger a deeper correction.

The chart below shows that the Secured Overnight Financing Rate (SOFR) remains elevated relative to the Interest on Reserve Balances (IORB). This divergence highlights persistent tightness in short-term funding markets.

Additionally, the U.S. Treasury’s General Account is increasing in size due to the ongoing government shutdown. This effectively drains liquidity from the system, creating headwinds for the Bitcoin market.

As discussed above, it is clear that speculative assets are the first to feel the pressure when financial conditions tighten.

Gold Pullback Sets Up Opportunity as Macro Stress Builds

Technical Structure Points to Bullish Continuation

Gold is correcting from record highs, but the price action suggests profit-taking rather than a trend reversal. The metal is consolidating above $3,900 and holding steady despite broader market uncertainty.

A break below this level could trigger a dip toward $3,700 within the existing bullish trend. However, if the price recovers above $4,050, it would complete a bear trap and likely set the stage for a renewed rally toward $4,400.

The long-term monthly chart for spot gold shows that the RSI has reached levels not seen since the 1980s. In October 2025, the RSI spiked as gold touched $4,380, but the price retreated before the monthly close. This maintained the RSI at a level similar to that observed in the 1980s.

A comparable overbought reading appeared in 2008. However, the correction in 2008 was short-term and resulted in a powerful rally that lasted until 2011. Given the current economic cracks and stress in the financial system, it’s likely that the gold rally is not over. However, this correction should be viewed as a strong buying opportunity ahead of the next significant move higher.

The log scale further confirms the long-term bullish trend for gold. It is observed that the price has broken above the key $3,000 level. Price has now reached the resistance zone near $4,400, marked by the red trendline. While this resistance is notable, it’s not as structurally significant as the $3,000 breakout level. Therefore, a break above $4,400 will result in more explosive momentum into 2026.

Manufacturing Weakness Strengthens the Gold Case

The macro data from the US support the gold thesis. The ISM Manufacturing PMI has remained in contraction territory for eight consecutive months. This contraction signals persistent weakness in industrial activity. This is not just a temporary dip but reflects deeper structural strain in the manufacturing sector.

On the other hand, new orders are weakening, and manufacturing employment has been in a downward trend. The drop in new orders suggests that demand from domestic and global buyers is fading. When businesses reduce new orders, it often reflects growing caution about future sales.

At the same time, continued declines in manufacturing employment highlight mounting pressure on the labour market within the production sector.

These indicators suggest that the US economy is losing momentum. This may raise concerns about economic growth. At the same time, it strengthens the case for gold as investors seek safe-haven assets amid rising recession risks and declining confidence in the industrial cycle.

Gold and Bitcoin Diverge as Liquidity Pressures Shift Sentiment

The key divergence between gold and Bitcoin lies in how each asset responds to tightening liquidity. Bitcoin’s sharp decline reflects its sensitivity to financial stress, with recent moves pointing to a speculative unwind as conditions deteriorate. On the other hand, gold has remained stable, consolidating within a bullish structure despite intensifying macro risks.

The US government shutdown continues to drain liquidity. Meanwhile, short-term funding markets show a persistent strain, which may further escalate market stress. However, these pressures are likely temporary. AI investment and persistent geopolitical tensions continue to shape the long-term economic structure. This environment supports both assets, but at different phases of the cycle.

In the current cycle, gold appears better positioned. Its resilience during tightening phases, combined with weakening economic data, makes it the favored safe haven. On the other hand, Bitcoin may exhibit extreme volatility and require a recovery in liquidity and risk appetite before it can resume its bullish trajectory.

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