In times of great economic uncertainty, investors do what they’ve always done: seek out safe-haven assets to navigate risk and protect their savings. Less than six months after the first lockdowns came into effect in the United States, the price of gold hit a record high, pushing above $2,000 an ounce. And with fresh lockdowns – not to mention stimulus measures – being considered to tackle a second wave, many remain bullish about gold in the months and years to come.
Of course, the process of buying, insuring, shipping and storing physical gold is off-putting, which is why gold-backed funds and futures remain popular. There’s another option, too: gold-backed digital assets, recorded on an immutable ledger and fully redeemable for the underlying bullion. Several projects of this nature have emerged, giving users the opportunity to store value in a safe-haven asset without taking physical possession of it.
CACHE Money: A New Way to Buy Gold
Brian Hankey is the Co-Founder of one such project called CACHE Gold. The Singapore-based venture is a little different than its competitors, though. As Hankey explains, “There is no comparison between the transparency data we provide versus our competitors. Through the CACHE Gold Explorer, we provide real-time tracking data on all the bars backing our tokens (CGT). Tracking data includes location, photograph, serial number, weight, purity, refiner, current valuation and more. Tracking data is provided directly by the vaults storing the gold – Brink’s, Loomis, Dillon Gage IDS, and The Safe House – and blockchain utilization prevents data tampering or manipulation.
“CACHE Gold was uniquely founded, designed and developed by precious metal and vaulting industry veterans. We didn’t simply recognize that gold was valuable and tokenize it. We know the industry inside-out.”
Doesn’t Digital Gold Already Exist?
Bitcoin (BTC), the largest and most valuable cryptocurrency in circulation, is often dubbed “digital gold” due to its scarcity, appreciable stock-to-flow ratio, and status as a speculative asset. While not every economist agrees that the asset deserves the moniker, much less its vaunted status as a hedge against inflation, the bitcoin-gold correlation did hit its highest level in the aftermath of Covid-19. Last month, MicroStrategy (NASDAQ:MSTR) bought up 21,454 bitcoin as its primary treasury reserve asset, before adding 16,796 in September (total value: $425 million). Gold-backed tokens, then, might seem superfluous to the crypto’s adherents. Why not just buy bitcoin?
According to Hankey, who invested in precious metals prior to starting the business, gold remains attractive due to its long track record. The more pertinent connection is the blockchain technology that facilitates both bitcoin and CACHE Gold.
“Blockchain technology allows CACHE to provide superior transparency in asset tracking,” he says. “I have been personally interested in blockchain tech since I first learned about Bitcoin in 2012. After Ethereum was released and I began to learn about smart contracts, I started to see the possibilities for tokenization of real assets and that’s when I started to think about gold-backed tokens.
“Our objective from the beginning was to provide a token with vastly superior transparency, that would also be designed to scale to billions of dollars and eventually support mass adoption.”
Auditing the Gold Trail
The logical question to ask is: how does it work? And what can you do with your gold-backed tokens once they hit your account? After all, if you own a gold bar there’s nothing stopping you from selling it to the highest bidder. A “gold-backed token” may inspire a sense of unease in some investors, who could reasonably wonder whether they actually own the metal. And what if the custodian files for bankruptcy? You may have to join the creditors’ queue to be remunerated. According to Hankey, these questions are easily answered.
“CACHE Gold tokens (CGT) are each backed by one gram of pure physical gold, and a token audit takes about a minute to perform using a web browser. Our asset tracking system, GramChain, supports any type of gold, regardless of weight or purity, as long as it meets industry standards for investment-grade gold."
Disclosure: No positions in any of the securities mentioned in this article.