Gold may be the go-too investment when stock markets are volatile and banks are in trouble, but owning it can be a pain.
If you physically own gold, you need to keep in safe. Which means keeping it in a safe, either in a bank or in your home.
Or, you can invest in a gold exchange traded fund (ETF), in which case you don’t actually own the gold, and will be charged an annual management fee.
A new startup that debuted in 2017 at the annual DisruptMining competition, sponsored by Vancouver’s Goldcorp (TSX:G), now allows people to store their gold in a digital wallet, using blockchain technology, and the first big deposit has come from Goldcorp.
Goldcorp has registered $4 million worth of gold – 3,000 ounces – from its Red Lake gold mine in Ontario with VaultChain Gold, a platform developed by Tradewind Markets, a New York-based startup that uses blockchain technology for digital gold storage and trading.
Blockchain is a secure, digital ledger that was originally used for cryptocurrencies like Bitcoin, but which is now gaining wider use as a way managing a variety of transactions.
The company behind Tradewinds is IEX Group Inc., an exchange that was started in response to “flash trading” or front-running from high frequency traders.
Sprott, the money a manger that specializes in metals, is a 20% shareholder in Tradewind; Goldcorp owns 5%.
Tradwind was among the finalists in last year’s DisruptMining, which is a bit like American Idol in that the artists who don’t actually win the contest often go on to ink record deals anyway.
“Tradewind didn’t end up winning the contest, but we invested in them anyways, just given that we liked their idea and thought it was good for the gold market,” said David Stephens, Goldcorp’s vice president of corporate development and marketing.
Currently, anyone who wants to own gold either has to own it physically – in the form of bars or coins – or through an ETF.
“You don’t actually directly own the gold in that situation,” Stephens said. “With blockchain technology what we can do is directly transfer ownership of physical gold without an intermediary. Instead of owning a trust, which owns gold, you own the gold directly, and we can transfer small amounts between people.
“While you can transfer gold on this blockchain to different people, they’re also creating an exchange for trading gold using the same exchange platform as IEX, but you’ll use the blockchain to settle.”
The 3,000 ounces of gold that Goldcorp has registered with Tradewind is physically held in the Royal Canadian Mint.
Anyone owning gold through Tradewind would essentially have a digital certificate that shows he or she owns some of the gold held in the mint. Ultimately, Goldcorp thinks blockchain will be good for gold prices.
“We think this makes it easier and better for investors to own gold and effectively it just increases the utility of the commodity,” Stephens said. “And anything that increases the usage of the commodity would have to be good for the price of it.