Highly speculative capital (also known as "fast money") is rapidly leaving both crypto and precious metals. Investors are rotating into semiconductors.
According to a detailed macroeconomic assessment by Jurrien Timmer, director of global macro at Fidelity Investments, this capital migration has greatly affected the prices of the alternative store-of-value assets.
"Fast money"
Timmer noted that speculative interest was initially concentrated heavily in Bitcoin and later moved to gold, thus triggering a nearly vertical rally. However, "fast money" has now abandoned metals entirely to chase the tech sector.
Gold used to be valued based on a "real rate model," meaning that it traditionally moves inversely to real interest rate yields. However, as the chart provided by Timmer shows, this is no longer the case.
In early 2022, the real rate model completely broke down, and gold transformed into a proxy for global liquidity.
According to the data provided by Fidelity, gold's massive rally was mainly caused by the growth of global money supply (M2), which climbed to a year-over-year peak of 12% in early 2026. The liquidity injection allowed gold to surge to its current all-time high of $5,595.
Global M2 growth has decelerated from its peak of 12% down to a current rate of 7%. Gold then plummeted to as low as $3,959.
Timmer argues that the current market sell-off is an overreaction. "With global M2 now slowing from a growth rate of 12% at the peak to 7%, gold is understandably weaker. But it’s too weak considering the modest deceleration in M2," he said.
Surging US dollars
In the meantime, the Federal Reserve is widely expected to reverse its recent rate cuts, which is driving a surge in the US dollar.
Due to the renewed central bank hawkishness, there is a "clear breakout from a long base" for the currency (as Timmer puts it).
The Dollar Index (DXY) has surged to 101.8, and a significant resistance is now behind it.
The "tightening" environment will not bode well for risk assets, including Bitcoin. The flagship cryptocurrency is currently struggling to stay above the $60,000 level.
