When in 2017 the price of bitcoin reached parity with gold by an ounce, many gold investors around the world became more interested in this new development. The current crypto mania has seen an increased interest in the concept of gold-backed cryptocurrencies. Investors tired with poor returns from low-interest rates are now embracing the chance to invest in gold with a new blockchain-based trading platform from The Royal Mint.

The Royal Mint

The Queen opened the Royal Mint in 1968 with headquarters in Llantrisant, South Wales. The government-owned company has a workforce of over 900 people and trained security staff oversee the security of the 35-acre site. With over 1,000 years’ experience, the Mint supplies roughly 5 billion coins and blanks to over 40 countries every year.

Bullion Coins

You can invest in four UK gold Bullion coin ranges. They include The Sovereign, Britannia, the Lunar and the Queens’s Beasts range of Bullion. There’s a range of three silver coins to choose from including the Britannia fine silver coins, Lunar coins of the Shengxiao Collection, and the Queens’s Beasts range of 2oz and 10oz silver bullion. There’s also a platinum range of the Queen’s Beast coins.

Why Invest in Gold?

According to a report by the World Gold Council, a market worth 4 billion pounds of bullion remains untapped. But, many potential investors shy away due to the perceived difficulty in finding a broker, a decent price, and safe storage.

The Royal Mint Bullion Platform offers ordinary investors a single gold coin such as the 22-carat George & Dragon 2014 Sovereign. The alternative is the 1oz Britannia Gold Bullion or Lunar Gold coin. There is no limit to buying bullion and there are a special advice and storage service for investors spending over £50,000. Investors can choose to have the coins delivered to their home, or choose to store them in the Royal Mint’s secure storage vault, which is under the protection of the Ministry of Defense. Storage fees charges every year are at 1% inclusive of a VAT of the market value of the gold held. The Mint also buys back gold coins from clients who have stored in its vault.

Smaller gold coins produced by The Royal Mint provide an inexpensive means of investing in the market. Signature Gold, for example, allows you to buy gold for as little as £20, and store it within The Vault.

The rare nature of gold means it’s more expensive to buy than silver. It may appear you get more silver for your money but the reality is more complex. Buying gold in the UK currently doesn’t attract VAT, whereas silver and platinum do. Gold prices tend to move slowly than silver due to its volatile nature and wider use within the industry.

What is Digital Gold Currency?

The idea of a gold digital currency is an appealing option for investors seeking an alternative payment system. After the uptake of the internet went mainstream, E-Gold became the first digital currency backed entirely by gold in 1995. Before it shut down, millions of people around the world were using the E-Gold service. Thereafter attempts were made to create a digital gold currency, but this was before the

Blockchain ecosystem was born. Blockchain technology has helped establish secure accounting methods, with Bitcoin emerging as a popular gold-backed cryptocurrency.

The current “gold rush” in the crypto world has seen several countries look to issue their own gold-based cryptocurrency. The concept involves issuing a token or coin that represents a value of gold (1 gram) equal to 1 coin. The gold can be stored in a secure vault or by a trusted third party custodian and can be traded with other coin holders. The price of the coin will always be the same as the current gold value. In case the crypto-coin uptake increases, the coin or token price has the potential to increase in a value higher than the price of gold. If the crypto-coin doesn’t take off, the value remains as the value of the gram of gold.

The Royal Mint Gold

Royal Mint first unveiled the block-chain based Royal Mint Gold (RMG) digital currency project in December 2016. According to data from The Royal Mint’s website, RMG is an alternative option to invest in and trade physical gold. Its main aim is to provide an investment vehicle the same as the London Gold Market with the transparency of an exchange-traded asset. To create the digital currency, the Royal Mint partnered with CME Group, the world’s leading derivatives marketplace. Testing of the Blockchain gold trading platform began in April 2017. The Royal Mint is now the first company to allow buyers to hold gold-backed assets on Blockchain. According to Tom Coghill from The Royal Mint’s RMG division, one RMG coin is equal to one gram of gold, and this is real gold you are holding when you buy RMG. Australia’s Pert Mint is the other country to create a gold-backed cryptocurrency.

Advantages of Investing in Gold

The main economic reason to invest in gold is the ability to maintain their value over time, especially in markets where other securities and investments are prone to inflation. Even when the relative value of currency changes, gold has absolute value. The price may fluctuate, but the number of goods or services an ounce of gold can buy has remained steady over time even during extreme market conditions. Other advantages include:

  • You can hold physical gold in your hands. It’s more of actual physical wealth.
  • You can transfer precious metals or RMG with ease. No need for third-party verification, bank accounts, or transaction fees.
  • Gold has an established, reliable value anywhere in the world. Any person around the globe will accept gold or silver as payment.
  • Gold has no counterparty risk. This means that once you own physical gold, you don’t rely on another party to fulfill a contract to retain its value.

As an investor, you need to understand investing in gold is not clear-cut. Gold is difficult to value, is subject to seasonal demand, and unlike shares and bonds it doesn’t provide income for investors. But you can hedge it against calamity, and for this reason, gold prices increase in the aftermath of a financial crisis. The blockchain ecosystem could help manage smaller amounts such as a single ounce of gold. This will lower the entry barrier to many potential gold investors, while also increasing the liquidity of the market.

 

By Jeff Mwaura, Jeff is Kenyan based freelance writer with focus on technology and finance.