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Gold for the Blockchain Era

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Gold for the Blockchain Era

By Andreas Ruf, the CEO of InfiniGold.

Gold’s unrivalled price stability makes it one of the most risk-averse assets in recorded history. Hailed for thousands of years for its ability to serve as a medium of exchange and store of value, it is now widely regarded as the quintessential safe-haven asset in the eyes of individuals and institutions (including central banks) worldwide.

It should come as no surprise, therefore, that investments into the precious metal and gold-related products have skyrocketed in recent years – an increasing number of investors opt to buy and hold physical gold, trade futures, or to bet against inflation with funds and ETFs. The modern gold industry has no shortage of options to accommodate all flavours of investor profile.

Of course, every option has its own advantages and disadvantages – high liquidity in the form of gold products comes with fees for transacting, storing and managing holdings, while physically holding bullion requires significant investment into security.

Tech-driven enhancements to the industry have become a priority for businesses, with automation, machine learning and blockchain technologies being deployed to maintain the relevance of gold in an increasingly digital age. Blockchain technology, in particular, shows a great deal of promise and is key to reviving the utility of gold in both digital and traditional markets.

Gold-backed Tokens

During the last 12 months, the stablecoin ecosystem has seen rapid growth. Fundamentally, these tokens operate differently from regular cryptocurrencies like Bitcoin, where price is determined by an embryonic market (and thus, is incredibly volatile). In stark contrast, the purpose of a stablecoin is to achieve parity with an asset held off-chain by an issuer – typically, a fiat currency.

These tokens enable the rapid and cheap transfer of value between individuals around the globe and given their price stability, they provide an ideal low-risk bridge connecting the crypto markets to the existing financial world.

To call a fiat currency ‘stable’, however, would fail to take into account a decrease in purchasing power over time: inflation effectively debases the value of all money in circulation, meaning that from an investor’s point of view, fiat currency is not an attractive long-term holding.

The Marriage of Gold and Blockchain

Tokenising physical gold not only enables token holders to enjoy the stability of gold, but it presents new opportunities for dealing with gold, by removing the pain points of existing products. Above all, users of gold-backed tokens would benefit from greater accessibility – physical gold is difficult to transport in large amounts and feasibly impossible to divide up without precision equipment.

For immediate acquisition, buyers are often at the mercy of premiums from brick-and-mortar retailers in their direct proximity. As touched on above, securing bullion by oneself is equally a costly endeavour, leading many to instead trade financial instruments on top of gold, or to seek out oftentimes costly vaulting solutions.

Gold tokens issued on a blockchain mitigate these challenges: an issuer will take physical gold into their custody, and issue tokens redeemable for a specific amount of bullion. In this way, each token maintains a fixed value in relation to physical gold but can be held, sent and received much like any cryptocurrency – accessible on a smartphone, highly divisible, and transferable for a fraction of a cent.

Gold isn’t going anywhere anytime soon – with a track record spanning thousands of years, it will continue to provide investors with a safe haven in times of economic and political turmoil just as it has always done. As it stands, though, it has to be accepted that in a digital era, it is somewhat encumbered as an asset class.

With the fusion of blockchain technology and gold, the gap between physical bullion and the digital world can be bridged, providing investors worldwide with a highly liquid and highly accessible token to cater to a vast range of financial strategies.

Investing

What should I invest and How do I invest

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What should I invest and How do I invest 1

By Imogen Clarke, The Fry Group

With all the uncertainty that has arisen from 2020, with lockdown threatening businesses and the warning of a second wave, the topic of investments has taken on new meaning. Nowadays, more people are concerned with what makes for a good investment, or, if you’re a novice, how to best invest.

For instance, you might be unsure about the reliability of the company you’re looking to invest in, as well as the long-term prospects of your investment.

If you are unsure of your investments, then it is best to seek advice from financial experts like The Fry Group, who deal with tax, wealth and estate planning. They will see that you have a strong financial plan in place to help meet your objectives. They will develop a strategy that is built around your needs and asses any risks that could hinder your plans.

There are some things you’ll need to consider for your strategy; for instance, are you looking to make investments that are more of a risk and will take longer to come to fruition? Or, alternatively, are you wanting a faster approach that will result in a steady income? Whether or not you decide to play it safe all depends on your current financial situation and whether you have the means to take more of a risk. Do you have any other debts that take precedence over your future plans? Is your investment strategy realistic?

With the aid of a specialist – or investment manager – you can design an investment concept that works for you and your goals, and start to build a regular income from your investments. There are four main areas when it comes to assets (groups of investments) that you can consider:

  • Equities
  • Bonds
  • Alternatives
  • Cash

Your investment manager will test the risks associated with your investment, and if it proves to be a positive investment choice, then you will be able to invest more over time.

So, how do you decide where to invest?

According to The Fry Group, ESG investing (Environmental, Social and Governance) is a good option for investors looking to support businesses that meet their similar ethics.

The main areas of ESG investing include:

  • Environmental challenges (climate change, pollution, etc)
  • Social issues (human rights, labour standards, child labour, etc)
  • Governance considerations relating to company management

According to The Fry Group, “Many investors choose to consider ESG investing in order to ensure any investment decisions reflect personal beliefs and values. As a result, they choose to support companies who are making informed, responsible decisions which take into account their wider societal and global impact. In this way investors can achieve peace of mind that their investments are creating a positive effect.”

ESG investing is also more relevant now than ever, as more businesses are looking to present themselves as an environmentally conscious corporation that recognises the values of their consumers.

As The Fry Group puts it, “In the past, ESG investing has been seen as a niche investment approach, for a relatively small number of people with specific requirements. This has changed significantly in recent years, with a growing awareness of environmental issues such as climate change and an increasing understanding of social issues and human rights. As a result, many people are increasingly interested in reflecting their opinions and lifestyle choices through the way they invest.”

So, if you want your investments to pave the way for your personal values and reflect your own morals, then this is the route to go down. But how does it all work?

There are four areas of ESG investing:

  • Responsible ownership and engagement: when companies are encouraged to make necessary improvements.
  • Avoidance or negative screening: whereby businesses are ‘graded’ based on how ethical their business practices are and are avoided altogether if their methods are not approved.
  • Positive screening strategies:when companies meet the ESG goals and are approved for investments.
  • Impact investment strategies: the purpose of this is to use investment capital for positive social results such as renewable energy.

You will need to take into account your own personal objectives as well as the objectives that meet the ESG investment criteria. And, in terms of financial performance, ESG investing can be hugely beneficial. Those who opt for ESG investing perform a more in-depth analysis into long-term and future trends that affect industries, meaning that they are better prepared for changes in consumer values when they arise. And, with all the unpredictability that this year has offered us so far, isn’t it better to do the research and have all angles covered?

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Investment Roundtable: Live with Jim Bianco

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With Q4’s macro picture still looking grim amid the return of exponential coronavirus waves in Europe and the U.S. and Europe, we speak with veteran macroanalysis strategist Jim Bianco, CMT for a data-driven deep-dive into the global economy and financial markets on Sept. 7th at 12pm EDT.

Sign up for this exclusive webinar now

Key themes:

  • Learn from Jim’s unique combination of quantitative and qualitative analytics which provide an objective view on Rates, Currencies and Commodities to make smart investment decisions
  • Identify important intermarket relationships he is watching with respect to Global Equities
  • Roadmap a global outlook for 2021 in view of socio-political backdrop giving viewers key takeaways and intermarket perspectives on global investing.

Sign up for this exclusive webinar now

Jim’s robust technical analysis includes a broad look at trends and themes in the markets, market internals, positioning such as the Commitment of Traders (COT), sentiment, and fund flows. Don’t miss out on this exclusive session from one of the investment world’s most insightful thought leaders.

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Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election

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Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election 2

By Rupert Thompson, Chief Investment Officer at Kingswood

Equity markets had another choppy week, falling for most of it before recovering some of their losses on Friday and posting further gains this morning.

At their low point last week, global equities were down some 7% from their high in early September. US equities were down close to 10%, hurt by the large weighting to the tech giants which at least initially led the market decline.

The market correction is nothing out of the ordinary with 5-10% declines surprisingly common. Indeed, a set-back was arguably overdue given the size and speed of the market rebound from the low in March.  As to the cause for the latest weakness, it is all too obvious – namely the second wave of infections being seen across the UK and much of Europe and the local lockdowns being imposed as a result.

These will inevitably take their toll on the economic recovery which was always set to slow significantly following an initial strong bounce. Indeed, business confidence fell back in September both here and in Europe with the declines led by the consumer-facing service sector. A further drop looks inevitable in October – fuelled no doubt in the UK by the prospect that the latest restrictions could be in place for as long as six months.

The job support package announced by Rishi Sunak did little to boost confidence. Its aim is to limit the surge in unemployment triggered by the end of the furlough scheme in October. However, the scheme is much less generous than the one it replaces as the government doesn’t want to continue subsidising jobs which are no longer viable longer term.  A rise in the unemployment rate to 8% or so later this year still looks quite likely.

Aside from Covid, for the UK at least, there is of course another major source of uncertainty – namely Brexit. Another round of trade talks start this week and we are rapidly reaching crunch time with a deal needing to be largely finalised by the end of October.

Whether we end up with one or not is still far from clear. That said, the prospects for a deal maybe look rather better than they did a couple of weeks ago when the Government was busy tearing up parts of the Withdrawal Agreement. With significant Covid restrictions quite probably still in place in the new year and the Government already under attack for incompetence, it may not wish to take the flack for inflicting yet more chaos onto the economy.

Markets remain unimpressed. UK equities underperformed their global counterparts by a further 2.7% last week, bringing the cumulative underperformance to an impressive 24% so far this year. The UK weighting in the global equity index has now shrunk to all of 4.0%.

It is not only the UK which faces a few weeks of uncertainty. The US elections are on 3 November. We also have the first of three Presidential debates this Tuesday. Joe Biden’s lead looks far from unassailable, a close result could be contentious and control of Congress is also up for grabs.

All said and done, equity markets look set for a choppy few weeks. Further out, however, we remain more positive – not least because the focus should hopefully switch from the roll-out of new lockdowns to the roll-out of a vaccine.

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