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By Carole Hofmann
- Gold is a stable asset that has preserved wealth for centuries, while fiat currencies have lost significant value.
- Inflation is eroding the value of fiat currencies, leading to increased interest in alternative assets like gold and cryptocurrencies.
- Gold-backed NFTs provide a secure and accessible way to hold and trade gold, offering an alternative to traditional gold buying.
Gold is not bought to create wealth, but to preserve wealth. Gold is the most value stable asset on the planet and has been used for centuries as a store of value and a means of payment.
It may not be so obvious if you look at just a short period of time. But since US President Nixon abolished the gold standard in 1971, all major fiat currencies have lost more than 90% of their value against gold. The dollar has lost as much as 97% of its value against gold, and even the Swiss franc has lost 70% of its value against gold.
With recent massive money printing frenzies – the quantitative easing after the 2008 financial crisis, during and after the 2020 Corona plandemic, and now with the Ukraine war and the raising of the U.S. debt ceiling – trillions more dollars have been printed in just a couple of years.
While the price of gold is being kept artificially low using derivatives to make it unattractive, real assets have already begun to appreciate against fiat currencies, leading to the inflation we see and feel today. Average consumer prices in the Western hemisphere have risen by over 16% compared with the 2020 base year, while individual items such as food prices have even increased by more than 30%. The cost of electricity, gas and other fuels has also risen significantly, with now almost 15% higher than in the 2020 base year.
Inflation is transitory, they said
Central bank officials have been claiming for three years that inflation is only temporary. But your $100'000 from 2020 are now worth only $87'000 in 2023.
With the money-printing frenzy, the debt burden in all Western economies has risen massively, and many market participants wonder whether the current dollar-based debt system might not eventually collapse.
And since many people see the crypto space, and Bitcoin in particular, as the best money alternative – since it is debt-free, decentralized and cannot be monopolized by any state – massive value outflows have left the fiat system in favor of crypto assets. The outflow is so massive that banks have now started to limit withdrawals to crypto and also to cash to keep retail savers away. Meanwhile, he big fish have started investing heavily in Bitcoin.
Gold as insurance policy
Something similar is happening with gold. In the global East, central banks, especially China's and Russia's, have massively increased their gold holdings. Many people have started buying physical gold to hedge their assets against inflation. While crypto markets are very volatile, gold is not. Gold is the best insurance in case of a crisis, hyperinflation, war or natural disaster.
Gold can always be sold or traded – no matter what happens and no matter what the state of the current financial system.
But paper gold may not do the trick. It is estimated that up to 100 times more gold is traded on paper than is physically available. This paper gold market is essentially a way for US banks to keep the price of gold in check in the face of the massive monetary expansion of the recent years. For now.
In the event of a crisis, it will no longer be possible to control the price of gold, nor will the paper gold issuers be able to deliver the physical gold. If all parties demand delivery, it will be impossible for the warehouses and short players to meet their obligations, and many investors will be left behind.
That's why it's important to hold gold in physical form. But physical gold is cumbersome to transport and presents a security problem if you have physical bars lying around. And do you trust your bank to hand over the contents of your safe deposit box during a major event?
How about a solution without gatekeepers who can block your access or freeze your holdings? Physically allocated gold, but managed digitally in a wallet, transferable via the blockchain and transportable without physical risk?
Gold on the Blockchain
The good news is that gold can also be held as a cryptocurrency in the meantime. However, with the well-known gold-backed cryptocurrencies such as PAX Gold or Tether Gold, no direct access to the backed physical gold is acquired. These currencies are fungible, which means that a token is not distinguishable from another token and cannot refer to a defined backed bar.
A better solution is offered by providers who underlay gold bars directly under so-called non-fungible tokens, NFTs. Here, the issued token refers directly to the gold bar backed for this token. NFTs can be purchased with backed bars in various sizes. The smallest bar, available from SwissGold, is 1 gram of gold and costs about 60 dollars, including the premium for small bars. Other bars are offered from 10 grams to 1 kilogram, and for large budgets there is also the 400-ounce bar.
Another advantage here is that the issuing company is regulated in Switzerland, the bars are stored exclusively in Switzerland with licensed gold dealers outside the banking system, and the bars can be physically claimed by the token holder at any time. NFTs, like other crypto assets, are directly transferable, tradable via the blockchain, and cannot be blocked.
So if you look to preserve your wealth in the turbulent times ahead, consider gold-backed NFTs as a real alternative to traditional gold buying, and best with the gold stored in a safe haven destination, such as Switzerland.
Author Bio
Carole Hofmann is a Swiss entrepreneur and consultant in the finance + technology industry.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.