In the last several years a “new”gold became available to the tech savvy millennial generation; Bitcoin. In a world where everything old is new again (albeit with a new name) Bitcoin has become an asset class that is, in some quarters, an alternative to gold. A new safe haven that is available to everyone with a ‘wallet’, a mobile device (aka, cordless phone) and accessible 24/7 anywhere in the world. And, with that worldwide fingertip accessibility, bitcoin has gone from mere pennies to almost $3,000 in the past decade. No matter what you may think of the digital/cryptocurrency revolution, THAT is impressive.
So, what about poor little old overlooked gold? That shiny yellow metal that has been a store of value for thousands of years has been feeling a bit ‘tarnished’ lately. Oh its had its ups and downs (sorry) with the most significant moves happening due to some historical major events……….actually two. In 1970 the U.S went off the gold standard (currency no longer backed by gold) which then had gold “pegged” at $35/oz. That resulted in a huge period of inflation which in turn caused a massive move in gold to just short of $900/oz in 1980. Oh yes, gold also was now finally legal to own here in the United States and helped precipitate the price spike. The “bubble popped” and gold settled in to a long period of mediocrity.
The second major event was more recent; the 2007/2008 worldwide financial crisis. In a massive “flight to safety” investors/traders/doom & gloomers poured into gold and the price spiked up to almost $1900/oz in 2011. Ironically, both bitcoin AND gold began their “run” around the same time as a safe haven investment and alternative to fiat currencies. Gold stopped in 2011 ($1900); Bitcoin didn’t and is still heading up. One other thing to note about the latest gold/bitcoin run-up? Demographics and a changing of the guard, so to speak. The ‘older’ generations were/are programmed to flock to gold in times of uncertainty while the younger generation headed to bitcoin and digital currencies.
THAT IS ABOUT TO CHANGE! Gold is being digitized. This single event will be historical and forever change the way gold is traded, stored and made accessible to a vast new generation of investors. HOW? The CME (Chicago Mercantile Exchange) and the UK’s Royal Mint have teamed up to shortly offer a gold backed one gram coin – the RMG – that will be traded on the CME’s worldwide platform with the physical gold coin stored in the vault of the Royal Mint. Led by Sandra Ro, Executive Director of Digitization at the CME, this ease of fully transferable, transparent and liquid market will cause a resurgence in gold like has only happened twice before. Think bitcoin backed by gold.
It has been estimated that there are well over 2 billion “unbanked” and “unconnected” people in the world (Asia, Latin America, Africa, etc) that are just starting to get access to mobile devices and will be able to invest, bank, get credit and basically ‘join’ the global community. Coupled with the existing developed global community there is a massive potential investment demand for a gold backed product such as the RMG. Think about this; if you are in a remote section of Asia and know you can save/invest some money, where will you “click” first? Gold or bitcoin? Obviously the digitized, stored and secure gold. Worked for thousands of years as a store of value and now it will be accessible ANYWHERE. The resurgence has begun.
This is not to say that bitcoin and the digital currencies will just disappear or fall to the wayside. There are so many uses for the blockchain and ethereum technologies powering the coins that have yet to be “discovered” that bitcoin will certainly continue to increase in value. Just be prepared to see the tarnish on gold polished up and shine again………..on a massive scale.