Gold recently hit a record high. So did Bitcoin.

Which to own? Decisions, decisions.

One’s time-tested as a store of value, and also as an object of affection over which countless men have died, and around which empires were built and lost. In modernity it’s functional as a doorstop and also a paperweight if you’re into garish office accessorizing.

The other has a much shorter history: A decade versus time immemorial. It proved to be a terrible inflation hedge in real time, but since inception it’s up almost incalculably, so it’d be unfair to suggest it somehow hasn’t held its value, and it wouldn’t matter anyway now that it’s back at record highs.

Neither offers any internal rate of return and, arguably, both are actually worthless, albeit for different reasons. One’s worthless because it has relatively few industrial applications, would be completely useless in a post-apocalyptic environment and ultimately can claim for itself only scarcity, an attribute that’s hardly unique. The other’s worthless because it’s just a spreadsheet entry. End of story.

A lot of you are exasperated by now. Maybe you’re like the former (and possibly future) US president: You love gold. If you could, you’d bathe in it. That I’d endeavor to unfairly impugn it counts as a transgression too grave to happily countenance. Or maybe you’re a Bitcoin acolyte. You loved it at $11,000, which is why you sold your Honda Civic to buy it, and now, at $71,000, you’re hypothetically driving a very respectable Benz (let’s call it a 2022 CLS with 9,000 miles). So what’s so damn funny? Not Bitcoin! Not you! You’re laughing to the bank.

Calm down. I’m finished with the jokes. And as most of you are aware, I’ve been a “proud” Bitcoin owner since 2021, and my gold allocation’s consistent with the recommended range.

Coming quickly back to the question posed here at the outset: If you had to choose between the two, which would you own? Flows data suggests the approval of Bitcoin ETFs is prompting many investors to choose the spreadsheet entry.

The figure above’s remarkable at first glance, but I encourage readers to note that the 90-degree inflection in Bitcoin flows is due to the ETF approvals.

What about the concurrent slide in gold ETF flows, though? Doesn’t that suggest a substitution effect? If not, isn’t it at least fair to posit a connection?

JPMorgan’s Nikolaos Panigirtzoglou says the answer to those questions is no. No and no.

For one thing, the trend in cumulative gold flows isn’t new. It’s been going on since the pandemic, and it “does not reflect an aversion to gold by private investors such as individuals and family offices,” Panigirtzoglou wrote, in a Thursday note.

The figure above gives you a hint as to what’s actually going on, or at least what Panigirtzoglou thinks is actually going on.

Rather than a switch from real gold to the digital variety, the trend in gold flows reflects a switch from paper certificates representing claims on real gold to direct holdings of physical metal. Panigirtzoglou described “an instrument shift away from physical gold ETFs to bars and coins,” which he explained as follows:

Privacy and tangibility have become a more important consideration for private investors since the pandemic and physical gold ETFs have a disadvantage in this respect relative to holding bars and coins. ETF transactions are recorded and their holdings are registered, thus lacking privacy and anonymity. And in a hypothetical catastrophic scenario for which investors are trying to hedge by buying gold, holding a paper certificate of gold ownership via an ETF, subjected to counterparty risk, looks less attractive and less safe than tangible gold stored privately.

There you go. The pandemic was a reminder that things can go really wrong, really fast, and the war served notice that if you end up being labeled an international pariah, your paper claims can be worth… well, worth less than the paper they’re written on.

“At the same time as selling gold ETFs, private investors and individuals have been buying bars and coins in a rather strong and steady manner since the pandemic,” Panigirtzoglou went on. “At $230 billion cumulatively since Q3 2020, these bar and coin purchases have more than outweighed gold ETF sales and have even outpaced gold purchases by central banks.”

That’s all fine and good, but paying for things in physical gold can be logistically challenging if it’s possible at all. And hoarding gold’s no panacea for most pariah states. When you’re an autocratic regime, nobody trusts a claim on gold stored in your vault.