A few days ago we first showed a chart of a dramatic divergence between the price of gold and bitcoin...

... which together with a recent unscientific poll showing that more Ron Paul followers prefer bitcoin to gold...

...prompted many to wonder if bitcoin - whether it is a commodity, currency, commodity-equity hybrid as some suggest, or simply a bubble as its opponents claim daily - was stealing demand for gold.

In an overnight note, Goldman's global head of commodities Jeffrey Currie answered this question, arguing that despite bitcoin's "explosive upward trajectory" the answer to whether "bitcoin is taking demand from gold" is no, and gives three reasons why there is a lack of substitution by investors from gold into bitcoin:

First, the investor pools are vastly different. Gold investors who use ETFs, futures or commodity indices are automatically covered by anti-money laundering (AML) and counter-terrorist financing (CTF) regulations which are already "baked in" to processes in these markets. Even physical trading in jewellery, bars, coins etc. has seen a huge increase in regulatory scrutiny, globally, over the last few decades. In the US, professional jewellers and dealers must have an AML program implemented, and significant cash purchases or precious metal sales require additional reporting to the IRS on a transaction by transaction basis. In contrast, there is still very little clarity on how trading in cryptocurrencies could be made to comply with AML and CTF regulations, even in theory. This creates huge regulatory hurdles for professional investors wishing to enter these markets.

Second, as the chart below shows, there has been no discernible outflow of gold from ETFs. Indeed, total known gold ETF holdings recently reached their highest level since mid-2013 (currently up 12% YTD, see Exhibit 8). This is somewhat related to the first point, as mutual funds are the largest holders of gold ETFs, but even accounting for this there is no evidence of a mass exodus from gold.