Physical gold and blockchain are combining to deliver the best of both worlds
In today’s uncertain investment climate, portfolio diversity is as important as ever, to hedge against inflation and volatility.
Precious metals have always been the vehicle of choice for investors through the ages and nothing has changed today. The most precious of all the metals with the greatest allure is gold. It’s likely that we first came into contact with gold as shiny nuggets on the bottom of riverbeds. There is clear evidence that gold has been used as a unit of currency since around 8,000 B.C. and the first pure gold coins were minted by the Lydians not long after.
Gold’s intrinsic properties dictates that it is useful for more than just a store of value. One of the most interesting use cases for gold is in the medical industry. Because it is biologically inert and non-toxic to humans gold was being used in dentistry thousands of years ago by the ancient Egyptians with the first recorded dentist was known as “Hesy-Ra” meaning “Great One of the Dentists”. In our modern time, gold is used in cancer research and made into a liquid colloid that can assist with rheumatoid arthritis.
There are also important industrial uses for gold that contribute to its value. The precious yellow metal is extremely malleable and possible to hammer into very thin sheets of foil. Gold is also an excellent conductor of electricity and widely used in the electronics industry. An average cell phone contains about 0.03 grams of gold equates to about US $1.45 at today’s prices. The combined value of materials in an iPhone is so significant that Apple recently announced its new recycling robot called Daisy which extracts valuable components from up to 200 phones an hour.
As an asset class, precious metals including gold have played an important part in facilitating a common means of transaction between different parties. With the introduction of paper currency gold was used to back the otherwise worthless paper. In the past fiat money could be used to redeem a fixed quantity of gold directly from the country issuing the currency. This was important as it reduced inflation and ensured that the market had confidence in the fiat currency. Unfortunately, there are no countries that still use a gold standard to back their fiat currency. The UK ceased to use the gold standard in 1931 and the US was soon to follow in 1933, eventually decoupling the dollar completely from gold in 1971. Since that time the value of the US dollar has been severely eroded by inflation as the national debt skyrocketed to its current rate of over $23 trillion which represents over 100% of the US GDP!
Although precious metals and gold are excellent for hedging against market volatility and inflation there are issues associated with storing them. Gold purchased on paper as an investment may have no real value in times of geopolitical upheaval or macroeconomic uncertainty. During a crisis, there is no guarantee that the physical gold will be available to collect. This means that gold stored in case of an emergency has to be kept in physical form, which presents risks. Storing quantities of physical gold can place the owner in danger should it become known by third parties.
Gold is an important part of a diverse investment portfolio but it also derives intrinsic value from industrial and medical applications. So, what is the best way to store and trade gold?
MetalStream is bringing a new product to market that combines the value of physical gold with the convenience and safety of a blockchain-backed security token. MetalStream’s MSGLD token is an ERC-1400 compliant token backed by physical gold stored in an accredited London Bullion Market Association (LBMA) vault. MSGLD tokens can be continuously traded globally or exchanged for physical gold at the rate of 2,000 tokens for a 10 oz gold bar of minimum 99.5% fineness. This represents a discount of 30% from the current spot price of gold. Security is added to the value proposition through MetalStreams ability to reissue or reclaim tokens in the event of lost access to a wallet or hacking. Tokenization of this most ancient of precious metals is bringing modern technological advancements to the ancient art of storing value.