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There's an old rule in investing that insists whatever asset is red hot right now will be ice cold in five years. The latest evidence for that maxim comes from the gold sector.

Appetite for the precious metal hit a peak in 2012. It has since slumped to its lowest point since 2009, according to a World Gold Council report published on Thursday. Demand for bullion slipped to 915 tonnes in the third quarter, which is 23-per-cent less than the frenzied level reached five years ago.

The most recent reasons for the sliding demand were the impact of Indian taxes and a decline in buying by exchange-traded funds during the past quarter. The more fundamental issue, though, is fashion. To many eyes, gold now looks like a fusty relic when matched up against the more contemporary glories of bitcoin.

Linking the two assets is no accident. Both appeal to the same group: folks who believe there's something rotten in the state of the global financial system and want a way to profit from what they believe will be the inevitable decline of paper currencies.

Since gold and bitcoin appeal to similar audiences, many of the same promoters and brokers who used to peddle shares of small gold miners to retail investors are now busily selling that same audience on the opportunities in cryptocurrencies.

Frank Giustra, the Vancouver-based promoter who made a fortune bringing junior miners to market, is now backing Hive Blockchain Technologies Ltd., which uses data servers to mine for digital riches.

Meanwhile, Canaccord Genuity Corp., the Canadian investment bank with deep roots in mining, is leading a financing for a cryptocurrency startup with the beguiling name of Global Blockchain Technologies Corp. Even tiny players such as MX Gold Corp. are getting into the game. The Vancouver miner recently signed a letter of intent to buy a blockchain business in Manitoba.

There's a certain element of hilarity in watching mining executives and promoters rejig their usual narratives to suit the times. ("Did we say you had to own real assets? What we really meant to say was that you have to buy immaterial electronic tokens instead.") But it's hard to blame the promoters for giving the public what it wants. Google searches for "buy bitcoin" have now overtaken "buy gold," according to Bloomberg.

The shift in popular taste poses a big problem for the major gold miners and other issues don't help. One headwind is the prospect of higher interest rates ahead. Rising rates reduce the appeal of gold because the metal doesn't pay any dividend or produce any yield. As the payoff from other investments grows, the lure of gold diminishes.

To add to gold's challenges, recent events have underlined the sector's vulnerability to politics. Acacia Mining PLC, an African gold miner, was recently hit with a massive tax bill by Tanzanian authorities and will have to shell out $300-million (U.S.) in a settlement brokered by its controlling shareholder, Barrick Gold Corp. Meanwhile, Eldorado Gold Corp. has announced that it's mothballing its Skouries project in Greece after years of frustrating permit delays.

Compared with prospecting for gold in remote locations and wrangling with local authorities for permission to mine it, peddling bitcoin and other cryptocurrencies seems like a sweet deal indeed. But investors who are hearing the digital hype may want to remember how fickle the market can be.

Rising interest rates are going to challenge bitcoin just as much as they do gold since both are non-yielding assets. As for politics, bitcoin has yet to face a full-scale regulatory assault, but you can be sure one will be coming if cryptocurrencies continue to attract money and keep on being linked to tax evaders and other members of the dark economy.

Then there's the fundamental question of what makes any asset valuable. Gold at least has the force of tradition behind it. Bitcoin, at the moment, seems to be riding nothing more than a dim sense that blockchain technology may turn out to be useful.

Remember the five-year rule: My bet would be that investing in bitcoin in 2022 will seem just as unappealing as gambling on gold does now.

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