If you’ve been following Peter Schiff for his prediction of the 2008 financial collapse or strictly because of his affinity for gold, then you’re probably aware that he is not a fan of Bitcoin, but would he be interested in gold-backed smart contracts?
The United States Federal Reserve cut interest rates by another quarter-point on Sept. 18 following the European Central Bank’s Sept. 12 announcement on its negative interest rates and decision to re-introduce quantitative easing. With negative-yielding bonds looking like a shaky refuge from the storm looming on the horizon, prominent investors such as Ray Dalio, Paul Tudor Jones and Stan Druckenmiller have been suggesting gold as a safe haven from what has been called a world war of currencies, with China and Russia appearing particularly keen to weaken the U.S. dollar’s political hegemony.
Meanwhile, central banks around the world have been on the largest gold-buying spree since Nixon took the dollar off the gold standard in 1971 — but what about everyone else? How does one go about purchasing gold?
Although the easiest way to invest in gold today is through gold futures, exchange-traded funds or mining stocks, gold is usually bought under the assumption that it will act as a hedge against broad economic instability. If the institution that is trading or issuing these contracts becomes insolvent (such as Bear Stearns during the 2008 financial crisis), the value of their investors’ gold contracts subsequently disappears.
Many financial advisors suggest purchasing gold bullion instead of so-called “paper” gold because the physical metal itself is not inextricably tied to the financial system. However, owning gold bullion comes with its fair share of inconveniences: physical gold is bulky and cumbersome, it’s not easily divisible nor is it easy to transport. The insurance required for transport is expensive and so are the costs of transforming a kilo of gold into smaller, more liquid chunks. In addition, many people do not want to store large quantities of gold at home, which results in having to find a vault or custodian that is trustworthy.