Reasons for investor withdrawal from gold while continuing to purchase Bitcoin

Gold has entered bear-market territory after relinquishing its yearly gains, even as US spot Bitcoin exchange-traded funds (ETFs) continued to draw in new investments, leading the two assets onto distinctly different trajectories.

As of March 23, spot gold was trading around $4,388 per ounce, according to goldprice.org, reflecting a decline of approximately 22% from its record high of $5,594.82 on January 29. The downturn accelerated following the onset of the latest conflict in the Middle East on February 28. Since that date, gold has decreased by about 17%, reversing the upward trend it experienced in the early weeks of 2026.

Concurrently, institutional investments have consistently flowed into the US spot Bitcoin ETF market. Data from Farside Investors indicates that these funds attracted around $2.42 billion in net inflows over the four-week period ending March 20.

This divergence has garnered attention across both macroeconomic and digital asset markets, as gold and Bitcoin are frequently discussed in similar contexts during times influenced by inflation worries, currency depreciation, and geopolitical tensions.

However, in the past month, investors have approached them quite differently. Gold has faced liquidation pressures as demand for cash increased and interest rate expectations remained high. In contrast, Bitcoin, through the ETF framework, continued to receive allocations via brokerage and advisory channels.

This situation is notable because gold began 2026 with robust momentum. Its current decline aligns with the widely accepted market definition of a bear market: a drop of 20% or more from a recent peak. Conversely, Bitcoin has managed to maintain enough stability to keep ETF investors engaged throughout this period of volatility.

Gold relinquishes early-year gains as rates remain elevated and investors seek liquidity

The decline in gold has occurred against a macroeconomic backdrop that has become less favorable for assets typically benefiting from lower yields and a weaker dollar.

The Federal Reserve maintained interest rates in March and projected the benchmark rate to be 3.4% by the end of 2026, while core personal consumption expenditures inflation held steady at 2.7%. This combination reinforced the perception that policy may remain restrictive for a longer duration than investors had anticipated earlier this year.

For gold, the impact is direct. Increased rates elevate the opportunity cost of holding a non-yielding asset. A stronger dollar further compounds the issue by making gold pricier for buyers using other currencies.

These pressures intensified as investors sought cash and liquidity following the Middle East shock, which necessitated a reevaluation of growth, inflation, and energy expectations.

Fund-flow data quickly captured this shift. LSEG Lipper data revealed that global gold and precious metals funds experienced approximately $5.19 billion in weekly net outflows through March 18, marking the largest weekly withdrawal since at least August 2018. During the same week, money market funds attracted $32.57 billion.

This rotation indicates that investors shifted towards liquidity and away from positions that had previously benefited from inflation and geopolitical hedging demand.

Consequently, gold’s decline fits into a broader portfolio adjustment where maintaining flexibility became increasingly important as markets reassessed the anticipated trajectory of monetary policy and commodity prices.

The selloff also followed a period where gold’s long-term support appeared solid. Demand from central banks had bolstered the bullion market throughout 2025, and the reserve case remained intact as 2026 commenced.

The recent downturn illustrates how swiftly short-term macro conditions can overshadow that structural support within a matter of weeks.

Additional fund data supports this trend. The largest US gold-backed ETF, SPDR Gold Shares (GLD), reported $7.07 billion in outflows in March, according to market data.

Gold ETF Outflow (Source: Global Markets Investor)

This surpassed the previous monthly record withdrawal of $6.8 billion set in April 2013. The speed of redemption reflected the rapid shift in investor positioning following gold’s earlier gains this year.

By the standards applied in financial markets, a 22% decline from a January peak clearly signifies a transition into bear-market territory.

Thus, gold’s drop represents more than a typical pullback following a rally. It indicates a widespread withdrawal from a trade that had been supported by reserve accumulation, geopolitical hedging, and concerns regarding persistent inflation.

Bitcoin funds extend their strongest inflow streak of 2026

While gold was declining, US spot Bitcoin exchange-traded funds experienced their most robust inflow streak this year.

Farside data reveals that the 12 US spot Bitcoin funds recorded four consecutive weeks of net inflows, with over $2 billion added during that timeframe. This marks the longest streak of 2026 and the strongest since August and September 2025, when the funds absorbed more than $3.8 billion.

CoinShares data indicates a similar trend on a global scale. The firm reported that Bitcoin exchange-traded products have seen $1.5 billion in inflows so far this month.

Crypto Asset Institutional Flows (Source: CoinShares)

These inflows occurred during a period marked by war risk, changing expectations for US interest rates, and renewed volatility across commodities. Even amid this backdrop, institutions continued to utilize the ETF structure to increase or maintain their Bitcoin exposure, while gold funds faced significant redemptions.

Last week, Bitwise noted that Bitcoin and other major crypto assets have outperformed US equities and gold since the beginning of March.

The asset manager suggested that this trend could indicate the early stages of a rotation, while also cautioning that recent price movements may reflect temporary volatility or isolated liquidity events. Bitwise added that historically, gold has led Bitcoin by four to seven months.

State Street Global Advisors highlighted the volatility gap in its March gold monitor. Over a trailing 10-year period, rolling 30-day volatility for Bitcoin averaged around 52.0, compared to 13.6 for gold.

From January 2016 through February 2026, Bitcoin experienced 30 months with losses exceeding 8%, while gold recorded only one such month, according to the report.

These figures illustrate the type of exposure investors were seeking through Bitcoin ETFs. Buyers were willing to accept greater fluctuations and deeper drawdowns in exchange for access to an asset that some investors consider a hedge against fiat dilution and policy risk.

CryptoQuant data further illustrates the divergence between the two assets. The firm reported that the Bitcoin-to-gold correlation dropped to minus 0.88, the lowest level since November 2022, indicating that the two assets were moving in opposite directions with unusual intensity during the measured period.

Bitcoin and Gold Correlation (Source: CryptoQuant)

Oil and rates may influence the next phase

Gold’s long-term support has not vanished, even after the March selloff, which is part of what makes the current divide between gold and Bitcoin particularly noteworthy.

The World Gold Council reported that total gold demand, including over-the-counter transactions, surpassed 5,000 metric tons for the first time in 2025. Gold ETF holdings increased by 801 tons last year, and central banks acquired 863 tons. In February 2026 alone, physically backed gold ETFs attracted $5.3 billion globally.

These figures indicate that official-sector buying and long-duration investment demand remained robust as this quarter began.

The current drawdown thus leaves investors weighing two opposing forces: short-term macro pressures from interest rates, dollar strength, and liquidity demand, alongside a structural reserve bid that persisted through last year and into early 2026.

Oil prices may play a pivotal role in how this balance evolves. Several banks have raised their 2026 Brent forecasts following the latest Middle East shock. Bank of America increased its projection to $77.50 a barrel, while Standard Chartered raised its estimate to $85.50. Bank of America also outlined a potential upside path toward $130 in the event of a prolonged supply disruption.

Rising oil prices would contribute to inflation expectations and could prompt the Federal Reserve to remain cautious for an extended period. This would impact gold and Bitcoin through different channels.

Gold would continue to face pressure from elevated real yields and dollar strength if policy remains restrictive. Bitcoin would be more closely tied to liquidity conditions, institutional risk appetite, and the willingness of ETF buyers to continue increasing exposure through regulated products.

For the moment, the most evident market signal is the divergence itself. Gold, traditionally viewed as a store-of-value asset during times of stress, has entered a bear market after declining more than 20% from its January peak. Bitcoin, an asset often associated with larger price fluctuations, has continued to attract ETF inflows during the same timeframe.

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