‘Digitalization will be the biggest driver and determinant of gold demand’

What is likely to be the biggest demand driver for gold in the next few years?

I think the industry is on the cusp of a digital revolution. There are many areas where we are advocating for change. First, trying to resolve the integrity of the gold bullion, the chain of origin of custody and the integrity of the gold bars. There is no point in digitizing or tokenizing untrusted assets. Therefore, we have dedicated ourselves to moving forward with this over the past 18 months. We came to an agreement with LBMA (The London Bullion Market Association) that we were trying to implement on this agenda and we worked on two companies, Xdras and Peer Ledger, to provide a global database for gold around the world. focused and which came into existence on 28th March this year. Seems relatively intuitive, just a database. But this database will be the one place for all the gold, all the delivery lists, all the shapes and sizes will go in such a way that the world knows their gold exists, what are the criteria behind each bar, what origin, where it is from and it gives people assurance

Secondly, security features are likely to change drastically at the moment, a technology where you can mark gold at the molecular level, which means you can have complete assurance that the gold is from the door. The phase of the ring on your finger can be tracked. And you can check it against a Distributed Ledger Technology (DLT) database. These two things going hand in hand will create an immutable ecosystem which I hope will give people confidence in the asset class.

On top of that, my goal is to digitize the entire global gold system, all the allocated piles sitting in vaults, banks and anywhere can come together and agree on a digital form of that gold.

The major obstacle for institutions to trade gold is that it is capital heavy, expensive to trade compared to other assets. Digitizing removes those obstacles overnight. You get nuclear agreement on trades, you don’t have to worry about where it is, it just stays where it is all the time. There is no need to transfer it, as you are trading the digital version of it. So all of a sudden, all the barriers to trading gold for institutions on a huge global scale are removed, in many ways, it suddenly becomes as capital light as a dollar. And so I think, that’s the biggest determinant and the biggest driver for gold demand.

Don’t you think that electronic forms of gold like ETFs are playing that role at present? Digitization will affect investment demand for gold. But how will it replace the other two big sources of demand, jewelery and central banks?

Yes, this product can underperform ETFs. Chances are. Do I think it’s going to provide a different form of negotiation between banks, almost like a dollar? Absolutely, where ETFs wouldn’t. I think it’s a different form of trading between institutions, and ETFs don’t cater to gold transfers around the world. It’s going to be a lot easier to do business, it’s going to be in different places, in a somewhat unregulated location but close to regulation. Not completely unchecked, we are not going near that place. But I want this token to sit alongside crypto assets as well, and in many ways, bitcoin means bitcoin. Hence, at the retail level, it facilitates the digitization of all those gold stocks. It’s about making it usable at the retail level.

You haven’t seen a big increase in ETF purchases despite high inflation. why do you think so?

I really don’t know. I think, specifically talking about the GLD ETF (Exchange Traded Fund), which is our flagship vehicle, it’s a speculative vehicle. Broadly speaking, the GLDM ETF is our constant buy and hold product and one that doesn’t really fluctuate, didn’t come from its highs.

The GLD Leviathan is quite volatile, it is very active in periods of volatility. So, I think there is more of a case for price going sideways. It depends who you talk to, you’ll get an opinion on this. What I would say is it is very likely happening at a trading level, people are becoming more confident that this is not going to go ahead and from an options perspective, selling the wings and above USD 2,000 an ounce Volatility is probably caught by selling on the downside. USD 1,500 per ounce The level is saying it’s never going to get there.

So, I expect that if you get any surprises, it will be very quick, the next step will be, because all of them will be removed from those positions. It’s a crowded trade and I think the longer a trade goes on, the more people get out, not the in. If they try to make some profit by selling at USD 2,100 per ounce and USD 1,500 per ounce, it will eventually break one way or the other and I expect it to turn upside down in due course. And then, of course, their volatility would have to go back and buy.

What are your thoughts on what the Indian government is planning or already doing with the National Spot Exchange?

This is a wonderful step in the right direction. I think international bullion exchanges too. We have worked closely with them as a partner to try to launch that exchange and domestic exchange. I think it puts India on the map. I think the idea of ​​having IBX, a conduit in the market in the country, is definitely the right thing to do.

I think you have to participate in exchanges. This is clearly a bit more difficult. I think the reason why a conduit is so important in the country goes back to my database. If you can actually put all the gold into that world and from there, as you did, give jewelers the ability to go directly to the exchange and buy from there, that’s just a great progress. This will attract international investors. How you get international banks here remains to be seen.

Do you think investment demand will drive gold prices in the next few years?

It is very likely that inflation will continue and central banks will put us in recession because they are so behind the curve. So this scenario is looking good for gold unless you get massive growth with inflation. He is the only one who is unfavourable.

I think the fundamental change in demand for gold is this new dawn, which will open up the potential for many investment funds that have not yet approached this market, to suddenly look at it differently.

The reason people haven’t done it before is because it is capital intensive and you have other assets that are equally volatile to trade. We are on the verge of giving it equal status. I think that’s going to be your key driver, people coming into the market to trade it.

So, when you use a technology like blockchain, essentially, it’s a way to cross national borders and distrust. Is that right? Is this a way to make a global system that is truly neutral?

Not necessarily, not by design. We chose blockchain because it can be constantly updated. This is visible to you. And if we were making a transaction, but not someone else, and it’s immutable, it can’t be broken. And it’s a great record that you can count on.

But in terms of token creation, it is not decided what kind of technology we are going to use at the moment.

So, it is not a form of circumventing the rules or circumventing the rules. In fact, it simplifies taxation, transparency and monitoring of these things in many ways.

Are you seeing early signs of a pick-up in gold buying by central banks? Logically, when you have a situation like the current one, you would expect to see the countries’ central banks pushing their purchases in opposition to each other.

Western countries are not major holders as many of them have a high proportion of gold as part of their reserves. In the past few years, mainly developing countries have been increasing their reserves. But if you look statistically, despite the current crises, they are still at a relatively low level. I would expect to see its continuation. There is no hard and fast rule as to what level you need or should have. But I hope the purchase continues. This is unexpected.

The demand for jewelery has been affected to a great extent by the shutdown in China. With that easing, do you expect a big recovery in demand?

I think, between last year and this year, we’ve seen pretty good growth. I think overall, we’re now at a higher $600 million between investment and jewelery demand than we were in 2018 and 2019. It is a combination of things- bouncing back from covid, demand and savings and price rise has come down.

Obviously, cost of living and inflation will eat away at people’s disposable income. The amount of disposable income spent on gold is probably going to be culture dependent. Do I expect to see that there will be much of an impact here? no not much. Unlike in other countries where it’s considered a true luxury product that’s part of your DNA, I’d expect to see more drift, but not here. I think you can have a very positive attitude. It depends, to be honest, in a nutshell, where central banks end up. I have never seen a situation where central banks have been so behind the curve.

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