The Golden Pressure Release Valve is Now in Operation
There's a new convention in gold markets – the first of its kind since 2000 when GLD launched as the first ETF tracking the price of gold – and giving people the ability to get exposure to gold price moves without taking delivery.
This new convention upends one of the last nagging problems with gold as a modern form of money.
The critique of gold has always been that 1) there's not enough of it (which is not much of a critique from my vantage) but also 2) it doesn't have the speed/convenience of modern digital currency that can be moved between accounts with ease.
Conversely, the critique against crypto-currencies is they're not backed by anything except for faith in the blockchain protocol.
Solving the problem of "convenience" while still having gold backing is now reality.
Tether, the cryptocurrency exchange firm, has been busy for the past year or so, building out a real gold-backed cryptocurrency in the form of the stablecoin: Tether Gold.
The firm has been buying up to two tonnes of gold per week for most of the past year.
That comes out to between $160-$320 million worth at $5,000 gold… every week – and it makes Tether the world's largest owner of gold bullion outside of banks and nation-states. Currently, Tether owns over $2 billion worth of gold in its own vaults.
If you have a Tether account, you can now easily, seamlessly and quickly move money from the US dollar… (or Euros, Chinese Yuan, Mexican Pesos) to Bitcoin… Ether… many other cryptocurrencies and Tether Gold – and back.
Tether Gold can also be redeemed for physical gold (though the redemption minimum is so far limited to one full ~430 oz gold bar…)
This new token is the first time the gold, crypto and fiat currency markets have been linked in one exchange.
Every single Tether Gold token is a concrete (allocated) claim on a specific gold bar from the London Bullion Market Association.
In contrast, GLD ETF ownership is unallocated, and is also not redeemable for physical gold. Unallocated simply means your specific share is not linked to a specific gold bar. It's a general claim on gold in a vault that the GLD fund managers pinky swear is all there.
Another benefit of Tether Gold token is they can be fractionated to six decimal places – meaning, you can buy 0.000001 of a troy ounce. That comes out to half a penny worth of gold at $5,000/oz….
Even better, there are zero custody fees for owning Tether Gold.
I'm not saying you should go out and open a Tether Gold account. I'm simply pointing out: this new technology makes it possible to easily own gold, to move it between accounts quickly/inexpensively AND to exchange it between major currencies and cryptos.
Ease of transaction means that anyone can turn their BTC ownership into gold ownership with the click of a button. That means that when people sour on crypto (as they have been lately) they can easily use Tether Gold as a pressure release valve.
It means in places where security is a concern, you can have off-site, allocated gold ownership without any storage fees.
And Tether isn't just buying gold… the company has also been buying up shares of a gold royalty firm, which I cover in my Golden Portfolio service.
There always seems to be some kind of tension between gold investors and crypto investors – but both groups are looking for a way out of fiat. This stablecoin from Tether bridges the gap between crypto and gold. Critics of gold now have gold ownership with the digital convenience and security of crypto – while critics of crypto now have an asset-backed crypto.
Every time a new market or technology opens up the door to ease of use, it tends to increase interest and ownership. That's the real exciting part about Tether Gold: it could have the same kind of impact on gold prices as the launch of GLD in 2000.
Since that launch, gold has outperformed the S&P 500 on average.
Making gold easier to own, transact in and keep safely is likely to be a boon for humanity – and gold prices.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio
No comments:
Post a Comment