When Bitcoin was rising by $1,000 a day back in December, you didn’t have to look far to find pundits speculating on whether the crypto might “replace gold” as a “safe-haven investment.”
Of course, that was before the digital currency peaked above $20,000 and then dramatically plunged to under $7,000. That put paid to the “safe haven” talk.
By comparison, gold, that 5,000-year-old “un-crypto,” has risen a modest 7% over the past year. What’s more, 2016 and 2017 marked the first consecutive years of gold gains since 2011 to 2012. We’ve talked extensively about all the ways there are to cash in on the resurgent gold bull.
But today, I want to tell you about a high-tech game changer I’m watching – one that promises to bring gold into the digital age.
Why is this “disruptor” important?
Well, it’ll eliminate most of the old “hassles” – security, portability, storage – that have kept gold’s potential “vaulted” and bottled up for centuries.
This promises to make gold incredibly easy to use as cash, with no more difficulty than we encounter using banknotes or plastic today – easier and as secure as Bitcoin, in fact, with none of the volatility.
Now, this exposes physical gold to extreme upside potential – that’s a given. But what’s more, this disruptor will act like rocket fuel for the small company I’m going to show you…
It’s Unstoppable Now: Gold Is Going Digital
Two of the global gold market’s strongest, most important pillars have turned to the blockchain – the technology underlying bitcoin and other cryptocurrencies and makes them virtually foolproof – to facilitate the tracking and trading of gold.
The first of these is the London Bullion Market Association (LBMA).
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The LBMA consists of the largest international banks, bullion dealers, and refiners, all overseen by the Bank of England. In fact, the association is one of the oldest wholesale markets for trading gold and silver; it’s hands-down the world’s largest spot gold market.
The association sets standards for “Good Delivery” bars, which are rules for size and purity of gold and silver bars used to settle trades and in international markets, as well as for most government and central banks.
The LBMA arrived in the 21st century, kicking and screaming, just three years ago. In 2015, after nearly a century of using an archaic gold price-setting mechanism (and some questionable dealings by its members), the association finally adopted an electronic auction system.
It’s come a long way in a very short time. Barely 36 months after adopting electronic auctions, the association announced it is seeking proposals for the use of blockchain for its network, seeking to reinforce its integrity.
Ruth Cowell, CEO of the LBMA, said, “The LBMA is continually looking at ways in which investors can be assured their purchase of gold bars addresses supply chain risks, as well as protecting them against issues arising from fraud and breaches of security.”
Sakhila Mirza, an executive director of the association’s board, said using the blockchain could help the LBMA trace gold’s origins to prevent money laundering, the possible funding of terrorism, and even “conflict mineral” issues.
But now, privately backed gold markets have already gone the next step.
Gold Gets Its Own “Coin”
Last year, the CME Group Inc. (Nasdaq: CME), through a blog post by the company’s head of digitization, Sandra Ro, publicized its intent to launch a token known as the “RMG “(Royal Mint Gold). The name comes from its partnership with the United Kingdom’s Royal Mint, which will back the token with physical gold in its vaults.
The RMG has an extremely ambitious goal: to transfer gold ownership – instantly, to anyone, anywhere, at any time.
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Blockchain technology will be used to substantiate and track the RMGs in circulation.
According to Ro, “There is no rehypothecation, there is no lending on that gold, and there will be enough physical gold to represent all the RMGs that are issued.”
One RMG will be equal to one gram of gold. At today’s prices, that’s about a $42 value for one RMG. And given gold’s relative stability compared to cryptocurrencies, it’s likely to be a lot less volatile.
The RMG will be traded between licensed dealers. Individuals will likely need to buy from those dealers and pay a markup for the benefit, not unlike premiums on physical gold.
There are others too, like Australia’s Perth Mint and Singapore-based Digix Global, both of which are establishing their own tokens backed by physical gold.
In North America, we have a more recent entrant in to this cyber sector.
Just last month, gold industry giants Sprott Inc. (TSE: SII), Goldcorp Inc. (NYSE: GG), and IEX Group Inc. announced a new digital platform to trade and settle gold transactions.
The aim is to streamline the trading process while minimizing the costs involved. The company, TradeWind Markets Inc., is the technology provider and will use a blockchain application it calls “VaultChain.”
VaultChain, initially aimed at North American physical gold dealers, will allow secure identification of participants, gold registration, and transaction settlement.
No management or administration fees will be charged to clients who can hold fractional gold quantities in their own digital wallet or on the TradeWinds blockchain. Instead, the company’s business model will be to charge transaction fees to dealers.
To set the ball rolling, Goldcorp has placed its “genesis block”, a seed deposit of 3,000 gold ounces, worth some $4 million, in TradeWind’s digital market. The gold for this new exchange is kept safe and sound in the vaults of the Royal Canadian Mint.
Now, here’s the play…
Stake Your Place in the “Future of Money”
Goldmoney Inc. (TSX: XAU) is the most attractive investment in this space right now.
The company, in existence since 2001, was established as a way to facilitate gold ownership and its use as a currency.
Goldmoney allows account holders to use their accounts to buy and hold gold, as well as to make and receive instant payments. In a sense, accountholders save in gold and spend their gold.
The Goldmoney Holding is an online account allowing the owner to buy and hold not just gold, but also silver, platinum, and palladium in insured vaults in five different countries.
The metals held in the account are fully allocated, segregated, and redeemable in physical form. Account holders can have a Goldmoney prepaid card allowing them to spend or withdraw cash, and they can hold their balance or exchange it into nine different major currencies.
In fact, the company has even teamed up with Mastercard to allow users to make purchases and facilitate spending while traveling.
Incredibly, U.S. and UK residents can even buy physical gold and silver for their retirement accounts through Goldmoney’s own pension products.
No,w with the Goldmoney App for iOS and Android, account holders can manage their Holding account to buy, sell, exchange, and redeem precious metals easily and securely, right from their device.
And… if actual cryptocurrencies are your thing, you can buy those too.
Both Bitcoin and Ethereum are available to buy, hold, and sell through the Holding account. It even offers offline “cold storage”, with private keys stored in password-protected hardware wallets, kept with a professional vaulting partner.
It’s easy to see why Goldmoney is my favorite digital gold play right now, but there’s even more on the horizon.
Beyond all of this, the company is continuously innovating, partnering, and expanding into related businesses.
These are unmistakable signs that Goldmoney is positioning itself to become the preeminent “one-stop” precious metals-backed savings, storage, and exchange market.
As the world’s largest precious metals payment network, with $1.9 billion in assets and growing, profits are virtually “hardwired,” earned through recurring transaction and storage fees on the total stock of client metal under custody.
This is the right move to make at a time when precious metals are entering a renewed bull market, and blockchain technology disrupts money itself.
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