When in 2017 the price of bitcoin reached parity with gold by an ounce, many gold investors became more interested in this new development. This is because crypto mania has led to increased interest in the concept of gold-backed cryptocurrencies.

As a result, many investors tired with poor returns from low-interest rates are now embracing the chance to invest in gold with the new blockchain-based trading platform from The Royal Mint.

About the Royal Mint

The Queen of England opened the Royal Mint in 1968 with headquarters based in Llantrisant, South Wales. The Mint is government-owned with a workforce of over 900 people. Trained security staff oversee the security of the 35-acre site. With over a century’s experience in trading gold, The Mint supplies roughly 5 billion coins and blanks to over 40 countries every year.

Why Invest in Gold 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. The Mint also offers several international gold coins including the Canadian Maple Leaf, South African Krugerrand, the Australian Nugget, the Austrian Philharmonic, and the American Eagle.

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

The Mint’s 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’re facilities for special advice and storage services for investors investing over £50,000.

Investors can choose to have the coins delivered to their home, or choose to store them in The Mint’s secure storage vault. The vault 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 store with its vault. Smaller gold coins produced by The 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. The price of gold tends to move slowly than silver due to its volatile nature and wider use within the industry.

Digital Gold Currency

The idea of a gold digital currency is an appealing option for investors seeking an alternative payment system. After the internet of things went mainstream, E-Gold became the first digital currency backed entirely by gold in 1995. Before its unceremonious shutdown, millions of people around the world were using the E-Gold service.

Later attempts were made to create a digital gold currency, but this was before the debut of Blockchain ecosystem. Since then, blockchain technology revolutionised the industry by helping 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. You can store the gold in a secure vault or with a trusted third party custodian, and later trade it in with other coin holders.

The price of the coin will always be the same as the current gold value. In case a certain 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 the same as the value of 1 gram of gold.

The Royal Mint Gold

The Royal Mint first unveiled the block-chain based Royal Mint Gold (RMG) digital currency project in December 2016. According to data from The Mint’s website, RMG is an alternative option to invest in and trade physical gold. Its main aim is to provide an investment vehicle, similar to the London Gold Market with the transparency of an exchange-traded asset.

To create the digital currency, The 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. Note that this is real gold you are investing in 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 its 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 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 regular 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 can 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 a focus on technology and finance.