LinkedIn Brent – G-Coin®, Back to Basics

June 22, 2021

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Emergent Technology & Payments recently hosted an event to celebrate a new partnership with Joe Graf, Jr. in the NASCAR Xfinity Series. As anticipated, NASCAR fans showed a great deal of interest in G-Coin™, our digital gold offering. The event was a timely opportunity to have a dialogue with G-Coin customers to understand their needs and respond to their questions. With a number of concurrent strategic initiatives in motion, it’s important for us to ensure that the basic principles driving what we’ve set out to do are clear to our customers and key stakeholders. Hence, the title of this blog — Back to Basics.

It is certainly an exciting time for G-Coin and Responsible Gold™, as our customer base and partnerships with mainstream financial services companies are growing by leaps and bounds. The capabilities of our blockchain-based ecosystem are attracting companies like Mastercard and MoneyGram International and, in turn, our new partners are adding to the functionality and overall utility of G-Coin.

Perhaps the most encouraging aspect of this campaign so far has been the broad range of interest in G-Coin — from managers of billion-dollar investment funds to everyday retail investors who are catching on that gold is now an accessible investment option for them.

For the benefit of our current and prospective customers and investors, I would like to share some of the fundamental points raised at the NASCAR event more broadly in this blog:

  • The unique benefits of investing in gold
  • Different ways to own gold
  • The utility of G-Coin tokens

Let’s start off with the most basic topic: Why gold has proven to be a stable asset.

Why Gold?

Consider the volatility of the global financial markets since 2008, including the recent market corrections and uncertainties associated with the pandemic and inflationary economic policies. Through all of these ups and downs, gold has been steady and predictable — preserving wealth and hedging off inflation, as demonstrated in this report from the World Gold Council (Chart 4).

Regardless of the pandemic and quantitative easing, gold remains both naturally scarce and in-demand for investors as well as industrial uses, and it is still the default store of wealth and value — just as it has been for thousands of years.

In a time of volatility and market disruption, gold is a particularly important asset due to its stabilizing properties. It is unmatched as an inflation hedge because it will naturally gain value as fiat currencies shrink due to inflationary monetary policies.

According to the World Gold Council in a 2021 report, “Adding between 2% and 10% in gold to a hypothetical US pension fund average portfolio over the past decade would have resulted in higher risk-adjusted returns.”​

The stabilizing properties of gold are increasingly important to investors who are looking at forms of alternative investments like cryptocurrencies. For the millions of people now investing in cryptocurrency, a higher allocation of gold could reduce the inherent volatility that we continue to see in these investments.

Research

How to Own Gold

People and organizations typically invest in gold through one of the following approaches: physical gold, structured products and exchange traded funds (ETFs), and (more recently) digital assets like G-Coin tokens. Let’s discuss the pros and cons of each.

Physical Gold

Physical gold is the original way to own gold, and it has several benefits. It’s highly liquid and fungible and can be quickly leveraged for cash. On the downside, owning physical gold typically requires a larger initial investment, as it is most commonly purchased in larger quantities. At the time of this writing, the spot price for an ounce of gold was around $1,800.

Once an investor has acquired physical gold, it must be securely stored. For most investors, this means leasing space in a secure storage facility, which can be quite expensive. Investors in physical gold must also pay close attention to provenance and allocation.

Provenance means where the gold was sourced and its route to market. It is critical for investors to take their gold’s origin and chain-of-custody seriously, so they can avoid counterfeit gold and/or gold sourced or refined through illicit, illegal, or environmentally harmful means.

Allocation refers to the legal ownership of the specific units of gold in an investment. In some cases, even though investors own a stake in physical gold, they may not have a clear legal title to any specific gold bars or bullion. In the event that the organization with the legal title to the gold becomes insolvent or otherwise encumbered, this presents a credit risk to the investor.

Solutions for both provenance and allocation are built into G-Coin tokens. Our gold is, in fact, Responsible Gold — gold that is mined, refined, and delivered to market in accordance with the most comprehensive environmental, social, and governance (ESG) controls in the industry. Conformance with our Responsible Gold Standards is assured by our proprietary blockchain technology, which verifies provenance and maintains complete transparency of the gold’s journey from mine to vault.

Our onboarding procedures and independent audit requirements ensure we are working with supply chain partners of the highest integrity. Additionally, our network runs on the next-generation QOS Blockchain, which is more energy efficient than the blockchain technologies underlying bitcoin, for example.

When you purchase G-Coin tokens, you are purchasing the legal title for a specific Responsible Gold kilobar (or parts thereof) that is stored in a secured vault — so there are no credit risks for our customers.

Traded Funds

Exchange Traded Funds and “Paper Gold”​

Another option for owning gold is to invest in retail financial products such as mutual funds, Exchange Traded Funds (ETFs), or stock in companies that mine or refine gold. ETFs such as SPDR Gold Shares (GLD) were created to address some of the challenges of owning physical gold and can be an attractive option. They tend to track the actual market value of gold and are highly liquid. These products are also cheaper to own, as investors do not need to consider physical storage.

The main drawback to this form of ownership is that there is an air space of sorts between the securities represented by the ETF and the physical asset. Often referred to as paper trades, the buyer owns shares in the trust that owns the gold rather than directly owning the gold itself. And not all ETFs allow certificates to be redeemed for the physical gold.

An important consideration in choosing an ETF is paying close attention to what asset it is actually tracking. For example, some gold ETFs track the actual price of gold, while others track shares of companies that produce gold, which are in a different asset class. ETFs that hold stock in gold-producing companies effectively water down the ability of the investment to serve as a hedge against volatility in equity markets.

One further concern is the issue of instant liquidity. Trades typically take two or more business days to complete, and when markets are closed during weekends, for a holiday, or due to a disruption of some sort, investors may be delayed in accessing their funds and making trades. G-Coin token trades, on the other hand, settle instantly once funds are cleared. A detailed analysis of G-Coin versus ETFs is included in our publication titled “Portfolio Allocation Benefits: Responsible Gold and G-Coin,”​ which can be accessed on the G-Coin website.

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G-Coin: The Best of Both Worlds

G-Coin tokens bring gold into the digital age. Responsible Gold, with more substantial assurances of provenance and ESG, is now available for institutional portfolio allocation. For retail investors, G-Coin tokens are accessible and affordable. They can be purchased for as little as $15 (0.25 grams of gold).

Storage fees are minimal, providing a cost-effective means of holding gold investments compared even to some ETFs. Plus, you can redeem G-Coin tokens for physical Responsible Gold at any time in increments of 10 grams.

But utility is really what sets G-Coin tokens apart from other gold products. With the settlement speed, liquidity, and stability derived from the one-to-one link with gold, G-Coin tokens (unlike cryptocurrencies that are subject to significant volatility) are an ideal option for peer-to-peer and cross-border transactions.

Moreover, the blockchain technology on which G-Coin tokens are created enables fractions of the physical assets to be tokenized into digital forms. G-Coin tokens can be traded in increments of as small as 0.01 grams, making gold available for day-to-day transactions. G-Coin tokens can now be spent like fiat currency.

Investors No Longer Have to Choose Between Stability and Liquidity

There are simply no other financial products available that make gold more useful and accessible than G-Coin tokens, and I would be happy to answer any questions you may have. Feel free to leave a comment below.

I’m a tech investor, fintech innovator, and company founder and chairman, and I’ll be writing about several related topics focused on the intersection of technology, commodities, supply chains, and capital markets. I hope you’ll join the conversation.

Disclaimer 

This blog is for informational and discussion purposes only and does not constitute investment, tax, legal, accounting, or other advice. No representation or warranty is made as to the accuracy, content, suitability, or completeness of the information, analysis, or conclusions provided. As with many commodities, the risk of loss in trading or holding gold can be substantial and should be considered carefully in light of personal financial conditions.

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