Gold will always be here to stay, our shared world history proves its worth

Gold has historically always been the economy’s hero, the de-facto store-of-value that economies around the world peg their legal tenders to.

See, the hero in gold’s story isn’t so much about its innate rarity or purity. Rather, it is the ability to hold its intrinsic value amidst changing external circumstances. Gold has gone through multiple trials by fire, and its true worth has shone amidst adverse circumstances throughout history. It’s worth more than just its lustre, as its perpetual shelf life reassures a timelessness and stability to its value regardless of the affairs of the world.

In recent times, however, we’ve seen the rise of fiat and free-floating currencies. Today, currencies represent more than just paper money, the means that build our global economy, given its ability to stimulate borrowing and lending to promote trade and commerce. In a recent New Yorker article ‘The Invention of Money’, writer John Lanchester observed -

“Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world. That’s hard to remember: we grow used to the ways we pay our bills and are paid for our work, to the dance of numbers in our bank balances and credit-card statements. It’s only at moments when the system buckles that we start to wonder why these things are worth what they seem to be worth…”

In fact, the dissolution of the Brenton Woods system in 1971 reduced our reliance on our shared historical recognition of gold’s intrinsic value, effectively pegged the value of our economy to that of the United States, the world’s largest economy.

However, as the world’s largest economy faces its biggest economic challenge yet, might we be at a critical juncture in history where conventional economics might be starting to show its constraints?

Rethinking Value

Precious metal commodities such as gold are fundamentally physical products. The returns on commodity investments are based on price rather than an income stream (such as interest, dividends, or rental). As non-perishable goods, commodity prices are reflective of an assortment of factors including our personal sentiments and confidence of its future value.

But what if there is more to the concept of value than a numerical representation of price alone?

If we can appreciate the reasoning that gold holds intrinsic value amidst changing external circumstances, the question then evolves into how we could make Gold as accessible as possible.

The rise of the internet has marked the age of information — where the exchange of information across borders has become increasingly seamless and instantaneous. Likewise, the rise of blockchain has marked the age of value — enabling the seamless and instantaneous exchange of value across borders.

Commodity derivatives and indexes, Exchange-traded funds and Futures funds have been at the forefront of innovation in finance over the past 30 years. Their roles in driving the world economy will continue as our economies grow more interconnected. This means that the combination of blockchain and Gold could represent the next evolution of our increasingly digital economy, complementing existing innovations in the financial markets.

Much like how Forex trading has evolved and easily accessible at our fingertips, we’ve yet to truly explore the potential that Gold on the blockchain might bring for the future. Through blockchain, gold can be purchased in a more secure, accessible manner. This too allows Gold to take full advantage of blockchain’s transparency and auditability characteristics.

The tokenisation of physical gold bullion enables the trading of gold in more accessible amounts, instead of exclusively at troy ounce measurements — potentially making Gold an everyday currency. Having the ability to trade Gold at such accessible sizes opens up the possibility of it being used for everyday purchases.

Likewise, this too offers us the opportunity to consider how Gold can create innovative asset classes that are more manageable and accessible to everyday investors. Through Digix, interested investors need not be concerned about purchasing a commodity derivative of Gold, they are purchasing part ownership of the physical gold bullion held in Digix’s vaults.

Business-blockchains and the advent of regulated digital asset classes represent the next phase in global trade and finance. Gold will always be here to stay. Blockchain is maturing and regulations are liberalising to the idea of tomorrow’s digital economy. Gold is no exception, it may change in shape and form, but its intrinsic value and recognition will continue to write the next chapter in our shared world history.

As Singapore’s regulations of digital payments evolve in the coming months ahead through its legislation of a Payment Services Act might digital gold be the alternative cashless option in a sea of ePayment applications?

Digix DGX

At Digix, we are able to sell 99.99% investment-grade physical gold bullions divisible down to 1 gram. Our gold bullions sit in private accredited custodial vaults and information are publicly available for viewing on our Asset Explorer page.

DGX holders will have full visibility over their gold ownership, transaction and inventory records, in an unparalleled fashion offering security that traditional gold trading supply chain does not provide. Such precision and consumer clarity have not been afforded until now by banks.