Buying Gold and Crypto – Hybrid investments in an Uncertain World

I touch the screen and it lights up. It gives me two clear choices: ‘Buy Gold’ or ‘Buy Crypto’.

I press ‘Buy Gold’, swipe my card, insert my phone number and select the amount: 1 gram.

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After a few minutes of whirring and buzzing noises (gold takes time), the machine spits out a white box from the slot.

I open the box, and inside is my Perth Mint gram of gold.

If you have no idea what I’m going on about, let me explain.

I’m talking about a crazy gold ATM/vending machine I stumbled upon at the latest Gold and Alternative Investments Conference (GAIC) last week in Sydney. I actually filmed the whole thing, you can watch it here.

The machine is a product from GoldFund.io, a token that provides capital for precious metal producers to get into production. Its aim is to make it easier to buy gold and/or their digital token.

That’s one of the interesting things about the GAIC conference, that it joins two unlikely players.

On one side there is gold, which has been a store of value for millenniums, then there’s other alternative investments, like cryptos and blockchain, which are quite technical and new.

Both communities have plenty of differences, but we are starting to see that there is also a lot that draws them together.

For example, gold can bring some element of trust into the digital space. And the advantage for gold is that blockchain can transfer value over the internet and make it easier to buy.

Who knows, we may see more hybrid initiatives like this in the future.

It was during the GAIC event that The Perth Mint chose to launch their own digital gold token, the first backed by government guaranteed gold.

What attracted The Perth Mint to launch their own gold token on the blockchain?

Here is how The Perth Mint answered my question (emphasis added):

While we continue to support traditional investment markets, we are also taking the lead on embracing new technologies to offer modern products which broaden our outreach to the digital markets and to a new generation of investors. Innovation in the digital gold markets is a vital component of our business strategy and supports our standing as a leader in the global precious metals industry.

And they aren’t alone.

During the event we also chatted with Paul Engeman from Ainslie Bullion. Earlier this year Ainslie Bullion also launched their own digital token backed by gold and silver.

You can watch the full interview here.

Back to rates

So this week the US Federal Reserve once again cut interest rates, making it the third cut this year — bringing rates to a low 1.5%. They are also engaging in ‘it’s not QE’ programs.

The Reserve Bank of Australia (RBA) has also cut rates three times this year.

One of the concepts behind cutting rates is that people continue spending money. Who wants to keep money in the bank with rates at 0.75% and inflation at 1.7%?

But this does actually bring in more risk, for even lower rewards.

It’s at times like this — when the world is increasingly moving towards negative rates and more quantitative easing — when interest for gold rises.

Back in 2008 central banks printed a lot of money and lowered interest rates to record lows. We did see somewhat of a recovery because of this. Now we are now seeing central banks bring in more stimulus.

At the same time, central banks are buying a lot of gold. In 2018 central banks bought the most gold since 1971, and are continuing their shopping spree this year.

The Dutch central bank recently issued this statement:

De Nederlandsche Bank (DNB) holds more than 600 tonnes of gold. A bar of gold always retains its value, crisis or no crisis. This creates a sense of security. A central bank’s gold stock is therefore regarded as a symbol of solidity.

My point is that as we’re starting to see a lot of cracks in our financial system, gold is fast becoming the safety blanket.

Regards,


Selva Freigedo Signature
Selva Freigedo,
Editor, The Rum Rebellion


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Selva Freigedo is a research analyst for The Rum Rebellion. Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table. Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default. Selva has also lived in Brazil, Spain and the USA. Back in 2000 she was living in the US as the dot com bubble popped… And in 2008 she was in Spain as the property market exploded and then collapsed… She has seen first-hand what happens when bubbles burst. Selva joined Port Phillip Publishing’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.


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