After a nearly a decade-long bull run, financial markets are enduring considerable turmoil. The stock market, a beacon of consistent growth for many investors, finally experienced a significant drop, erasing the year’s gains in an abrupt selloff. Meanwhile, interest rates are rising, narrowing the margins in the housing market. As The Wall Street Journal recently reported, “Sales of previously owned U.S. homes posted their largest annual decline since 2014 in October.”
Even cryptocurrencies, which captivated investors since they burst on the financial scene in early 2017, are in disarray. Several sudden drops have left investors reeling, and headline-inducing lows are a daily occurence.
To put it simply, across the financial spectrum, instability is becoming the norm.
As a result, many investors are turning their attention to gold, a historically stable asset in times of turbulence.
When other financial markets become unruly, investors flock to gold, and across the board, gold prices are increasing. Valued by weight and regulated by commodities markets, it’s accessible to both amateur and institutional investors. Perhaps that’s why gold is tried and true investment asset with roots all the way back to 700 B.C.
Despite stubbornly low prices throughout the current economic boon, Goldman Sachs predicts that commodity prices will spike in 2019. In a report published by Bloomberg, Goldman predicts, “Given the size of dislocations in commodity pricing relative to fundamentals — with oil now having joined metals in pricing below cost support — we believe commodities offer an extremely attractive entry point for longs in oil, gold and base.”
At the same time, the price of gold futures are rising, and stocks for gold producers are responding to the expectation that gold investment will become more popular and prevalent in the months ahead.
Of course, in many ways, gold is a uniquely antiquated investment. While it’s easy to acquire, it’s difficult to store, resell, and divide. Fortunately, gold investments are taking on a new meaning in the digital age.
Digital Gold
The cryptocurrency movement may be most famous for the mainstreaming of Bitcoin, the first and still most popular digital currency, but it’s transforming investment markets in other ways as well.
Asset-backed tokens are making investments like real estate and commodities achievable, divisible, and as easy to buy, sell, and trade as a stock.
Gold-pegged digital currencies, like the DGX token offered by Digix, make gold investment a practically viable solution as other markets experience a downturn. Using the Ethereum blockchain, Digix equates one gram of gold with a single DGX token, providing an intuitive and easy-to-navigate setup for investors.
By deploying blockchain technology to account for both the actual gold held by currency operators and to facilitate transactions of gold-backed coins, there is an avenue for quickly acquiring, selling, and managing gold investments.
For example, before digital gold became a reality, investors only had two options for acquiring gold, and neither one is particularly conducive to an effective investment strategy. Investors either had to invest in an ETF that included gold, or they had to purchase physical gold bars that had to be transported and stored, a heavy ask for most people.
In contrast, digital tokens pegged to the price of gold offer an easy way to acquire and trade gold.
A Popular Investment Vehicle
To be sure, digital gold is quickly becoming normative among financial institutions. Both Australia and Canada are embracing digital tools for facilitating gold investment. As Australia’s Perth Mint explained, “digital gold certificates offer institutions the opportunity to present investors with a new, secure and easy way to trade, hold and transfer physical gold.”
Although it’s unclear exactly how much money these countries have invested in digital gold initiatives, there is evidence among consumer investors that it’s a maturing market. For instance, Digix has sold $3 million in DGX tokens, which equates to 81 kg of gold.
Indeed, some of this traffic may be the result of a recent partnership with SilverGoldBull, North America’s largest precious metals dealer, which exposed their 45,000 customers to the gold-backed tokens.
Since markets are cyclical and market volatility is a natural successor to boon periods, gold figures to play a prominent role as a safe-haven asset in the months ahead. The introduction of gold-backed tokens means that executing this strategy is both attainable and realistic. As blockchain technology is more widely proliferated and accepted, these products are expanding their reach.
Nobody likes a downturn, but today’s market volatility presents a unique opportunity to invest in gold is uniquely suited for our modern, digital-first financial environment.
About the author
Shaun Djie is co-founder and COO of Digix. Digix is an asset tokenisation company incorporated in Singapore in 2016, with physical gold on the Ethereum blockchain, DGX, being its first product. It aims to democratise access to gold for the masses.
