Digital Gold
Digital Gold
How to protect assets during a crisis? This issue becomes relevant not only for professional investors, but also for ordinary citizens, who are fully affected by the crisis.
In this article we will cover the following topics:
- Gold during the 2008–2009 crisis
- The rise in gold during the coronavirus pandemic.
- Risk hedging: gold as an alternative currency.
- Digital gold
- Other defensive assets: US Treasuries, yen, franc.
Bitcoin as a New Alternative Currency, Digital Gold
The coronavirus pandemic at the very beginning of 2020 has become a classic "black swan" (a term from the book of the same name by Nassim Taleb) for global financial markets. The chain reaction in March triggered a cascading asset collapse in the markets. Frightened by the developing economic crisis, investors are looking for "safe havens" in which they can wait out the dangerous months and hedge risks in the stock market.
One of the most promising options is considered to be gold, which a number of experts predict significant growth and reaching new historical highs. Let's see why the yellow metal is so attractive in the current environment, and what other alternatives there are in the financial markets.
GOLD DURING THE 2008–2009 CRISIS
Civilizations come and go, and gold, even in the digital and robotic 21st century, continues to be a universal measure of value. Even after the abolition of the dollar's tight peg to gold - the "gold standard" - in 1971, the yellow metal has not lost its relevance as one of the basic reserve instruments.
The example of the 2008–2009 crisis is indicative. Gold began its ascent to new all-time highs back in 2007, when signs of a depleting bubble in the US mortgage market began to appear.
At the height of the liquidity crisis in the fall of 2008, the gold price is experiencing a strong correction, but in 2009 it fully recovers and reaches new historical highs. Experts link the resumption of growth with the launch of the US Federal Reserve's quantitative easing program.
As a result of the bullish cycle, the price of the precious metal futures jumped threefold from 2007 to 2011 - approximately $ 600 to $ 1800 per troy ounce.
The correction began at the end of 2012, when it became finally clear that the world economy was on the path of sustainable recovery, and the US Federal Reserve would prepare for tightening monetary policy.
GROWTH OF GOLD DURING THE CORONAVIRUS PANDEMIC
A little more than ten years have passed since the 2020 crisis is already raging in the yard. However, the story of the popular defensive asset is strikingly similar. The price of gold futures came out of the "flat", in which it had been since 2013, even on the eve of the crisis - in July 2019. Then, only a few experts pointed to the likelihood of a cyclical recession in the global economy.
During an intense sell-off of assets from late February to the beginning of the third decade of March, gold corrected strongly. As in 2008, the main reason was the lack of liquidity. Many players with margin positions had to sell literally everything in order to "not get into margin calls". A similar situation was with institutional investors, who are required, according to the rules, to comply with a certain risk ratio and the ratio of assets in portfolios. Due to the collapse in prices, they even had to get rid of defensive positions.
GOLD AS AN ALTERNATIVE CURRENCY
What happens to a country's currency when a country's central bank turns on the printing press? That's right, the course is subject to strong pressure. Like prices for any other assets, exchange rates are formed according to the laws of supply and demand. The higher the supply (emission) with a constant level of demand, the lower the price.
What happens if all of the world's leading central banks turn on their printing presses in sync? Approximately what we are now seeing on the international currency market (Forex) is the EUR / USD "nervous shuffling" from side to side. On weekly candles, a completely atypical fluctuation amplitude for this conservative pair appeared.
Synchronous monetary stimulation in the world actually leads to a worldwide trend towards the loss of the value of money. This is roughly what we saw during and after the 2008–2009 crisis.
Despite the increased volatility, monetary gold is actually the only international alternative currency that is not subject to a supply shock. The demand for it is growing, both from the side of central banks, to some of them diversify reserves, and from the side of agents.
Many leading experts speak about gold as the main reserve currency during the depreciation of the dollar and euro. One of the most active promoters of the yellow metal is legendary investor and hedge fund founder Bridgewater Associates, Ray Dalio.
"What are the central banks going to keep as reserves? What has been tested and correct? They are going to keep gold. It is a reserve currency and has been a reserve currency for thousands of years, "he said in an interview in March.
Dalio's fund Bridgewater Associates predicts that the price will hit the psychologically important level of $ 2,000 per ounce and hold the asset. A number of major investment banks are also bullish on gold. For example, analysts at the American bank Citi also cite $ 2000 as the main medium-term target.
It is worth noting that many investment funds are gaining in precious metals as a hedge of risk in equities. Monetary gold is likely to be in high demand until investors switch their strategies from risk off to risk on. A likely trigger for the start of an uptrend will be the beginning of the rollback of central bank stimulus measures.
How soon will this happen? To date, there is no single answer.
The optimistic forecasts say that the recession will be V-shaped. This means that a sharp decline in the economy will be followed by a sharp recovery. Indeed, already at the beginning of April we are seeing this in China, which has already announced the end of quarantine.
However, there are many skeptics who point to the risk of an L-shaped recession, when the decline is followed by protracted stagnation. There is a potential danger that monetary stimulus will not help combat the economic crisis, which will trigger a series of bankruptcies in the debt-laden corporate leading countries of the world. In this case, trading and investing in gold will be relevant for another year.
OTHER PROTECTIVE ASSETS: US TREASURIES, JENA, FRANK
Investors are generally bullish on gold. However, the list of defensive assets is not limited to precious metals (monetary silver, platinum and palladium are still used for similar purposes).
Continuing the topic, of course, one cannot but mention bonds. First of all, about the debt obligations of the American government - the US Treasury. They represent the reserves of the world's central banks and private investors.
Even the most liquid securities - 10-year bonds - showed similar dynamics to gold in March this year. A sharp correction was followed by an exit to multi-year highs. This confirms the hypothesis that the sharp correction in the price of the precious metal was caused by a shortage of liquidity, and not by fundamental economic reasons and a shift in the balance of supply and demand.
Digital Gold
On close observation, it can be said that whenever the price of gold falls, it always rises for a short period of time. A few years ago, a gram of gold was sold for only $ 5, but now the price of gold can reach $ 50 or more. Obviously, for those who have bought and held gold, they have been making profits for several years now. So it will be with GOLD TOKEN in the near future, every investor in DIGITAL GOLD will make huge profits as the price of gold rises.
You can get your digital gold token on multiple exchanges like Cryptex, Bitforex and many more, or you can easily buy it from the digital online marketplace. You only need to fill out a form indicating how much gold you are going to buy and in what currency you are going to pay.
You need to store your gold somewhere: You can store tokens in multiple wallets like Guarda, TrustWallet, MyEtherWallet, Metamask, and any other ERC 20-enabled wallet
PHYSICAL ADVANTAGES OF GOLD
- Hedging against inflation. Gold turned out to be a way out against inflation. This has yielded positive results in many negative events. In the event of a monetary downturn and market unpredictability, it becomes the best support against inflation.
- Highly liquid asset
- Simplicity: indestructible, relatively rare.
- Low volatility: the supply of gold in the world is limited, which leads to exponential price increases with increasing demand.
It is an established fact that investing in gold is a very lucrative investment in precious metals for anyone looking for passive income. It is important that the value of one gram of gold in gold is relatively lower than in bank coin, which additionally makes gold a very attractive investment option. Digital Gold stores all of its gold in a highly secured location (BullionStar vault) and the amount of physical gold stored can also be matched against the total token supply in real time. Hence, all transactions are very transparent and secure as all transactions are performed on the Ethereum blockchain network.
Gold token
Each ecosystem has its own currency. Thus, the currency of the Digital Gold platform is the GOLD token, also known as Digital Gold. GOLD is an ERC20 based token that resides on the Ethereum platform. They can be redeemed on the Digital Gold platform for free. It can also be traded on other global platforms like Bitforex. It can be saved in wallets along with MyEtherWallet, Trezor wallet, Metamask, etc.
Links:
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Marketplace: . https://gold.storage/market
Whitepaper: https://gold.storage/wp.pdf
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