A new gold standard: BitGold offers a fresh way to buy and sell the yellow metal

The last decade is a tough time to be a saver, but the new phenomenon of negative rates of interest combined with recent resurgence in the price of gold causes savers to appear again to gold like a savings vehicle capable of preserving purchasing power.

All which helps make the timing of the recent launch of BitGold, a new digital saving and payment service, look prescient. First, remember that BitGold isn’t the same as the greater known digital currency called Bitcoin. However at a briefing Tuesday morning, coincident with the annual Prospectors and Developers Association of Canada conference, BitGold executives credited Bitcoin for raising awareness about network-based other options to a central banking system.

The rise of so-called “fintech” (financial technology) has additionally made it feasible for BitGold to quickly build a network effect. It’s supplied by GoldMoney Inc., a worldwide precious metals custodian based in Toronto (trading as XAU around the TSX Venture Exchange). The company has raised $70 million and hopes to be on the TSX soon.

Until the early 1970s, paper money was backed by physical gold; then, when Richard Nixon took the U.S. dollar off the gold standard, most nations moved to “fiat” currencies backed by simply government promises. Now another phase of digital currency ledgers is developing a comeback for gold, albeit outside the central banking system.

Personally, I’ve always been a believer to maintain roughly a 10 percent overall allocation to gold or precious metals. So far, this was achieved either with gold mutual funds or ETFs, or by holding coins or bullion directly.

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Gold often zigs when other markets (such as U.S. stocks) zag, so it can offer a stride of diversification and, therefore, safety. During the 2007-2008 economic crisis, for example, gold, cash and bonds were about the only asset classes that rose when most other assets fell. While gold has already established a tough go of it the final two years, so far in 2016 it has been strong, even relative to the Canadian dollar. 



With BitGold, customers’ are credited with real physical gold, stored at any one of seven Brink’s locations in main global financial centres. Customers can also choose to take physical delivery.

BitGold’s global gold network is nearly 75 % of the way to a million users (739,252 finally count) in 150 countries. A million users has shown a vital threshold for a range of tech companies, including PayPal (which took two years to obtain there), Facebook (within year) and Uber (18 months) – BitGold is at spitting distance of this milestone after just nine months.

Through this gold-based global network, you can purchase or sell gold in a one percent transaction cost in each direction.

Early customers are mining companies, which allow employees to become paid wholly or in part in BitGold, or permit shareholders to receive dividends in BitGold.

One reason the firm made a decision to go public early was to assure customers of regulatory compliance. There isn’t any counterparty risk because – unlike ETFs which are essentially paper offers to deliver real gold – BitGold customers have direct ownership of the underlying metal. It’s “fully reserved, allocated and redeemable under Bailment law,” the company’s materials state. Customers do not pay for that storage at Brink’s – it’s covered by BitGold – and also the holdings are fully insured.  BitGold could be transacted in more than 100 currencies all over the world.

This occur in just three steps: first, you buy the gold from the funding source of option for a fee of one percent of gold’s spot price; then you select the currency in almost any amount; and finally you select the Brink’s vault location. You can later sell your gold in your bank’s currency, also for a fee of 1 percent from the spot price. In case your intent would be to build long-term savings, that can be done with recurring bank transfers daily, weekly or monthly.

BitGold offers a gold-backed prepaid GoldMoney MasterCard (free when you open an account), which can be used for everyday spending all over the world. It is also launching a Global Business Payments business.

Financial Post

Jonathan Chevreau is the founding father of the Financial Independence Hub and can be reached at jonathan@findependencehub.com