Bitcoin-Gold Price Correlation Shows Widest Spread in Over a Year

With gold on the defensive and down roughly 6 percent since mid-February, bitcoin may continue to shine brightly in the near future.

The 90-day correlation coefficient between bitcoin and gold - a statistical measure of linear interdependence between the two variables - is currently seen at -0.71, the lowest level since March 20.

A negative number represents an inverse relationship, i.e. meaning the two variables are moving in opposite directions, which has been the case between bitcoin and gold since November.

The negative correlation had weakened somewhat in the first quarter with bitcoin recovering to $4,000 by February end amid an extended gold price rally to a February 20 high of $1,346.

Gold ended March below $1,300 and has remained on the back foot ever since.

Interestingly, bitcoin surged past key resistance at $4,236 on April 2 - two days after gold found acceptance below $1,300 - and jumped to a five-month of high $5,622, according to CoinDesk price data.

With gold looking increasingly weak, there is reason to believe that the cryptocurrency market leader may extend its ongoing rally past the psychological resistance of $6,000.

From a technical perspective, gold is indeed developing a bearish market structure referred to as the "Head and shoulders." reversal pattern, which suggests more downside is likely in the near future.

Gold broke down from the pattern on April 16, confirmed by its price finding acceptance below the pattern's neckline, with its scope now set for the 200-day moving average currently located at $1252.

Again, correlation is not causation, but gold's near-term bearish outlook may be a sign of positive things to come for bitcoin's direction.