Category: Glint Special Report

• The US central bank confirmed market expectations by raising the main interest rate by 0.25%.
• US Federal Reserve funds rate is now 0.25%-0.50%.
• This might be the first of at least four further rate rises this year, and more in 2023.
• Borrowing costs for everything from credit cards to mortgages are headed higher.

In the past 12 months, the annual inflation rate in the US has moved from an official 2.62% to 7.9% – a 40-year high. Jerome Powell, chairman of the US Federal Reserve, and Janet Yellen, US Treasury Secretary, have shifted their narrative about inflation. A year ago they called it ‘transitory’. Yellen warned last week that Americans will probably see another year of what she called “uncomfortably high inflation”.

Putting up interest rates is a central bank’s main tool when it comes to trying to prevent inflation from spiraling beyond control. But this inflation is largely imported and probably beyond the control of anything the US Fed can do. The fall-out from the war in Ukraine has pushed energy and grains prices to record levels; China’s zero-Covid policy continues to disrupt supply chains. The risk is that making borrowing more expensive could throw the US economic recovery off-course, while failing to cool red-hot prices. According to a note to clients from Bank of America, for the US “economic growth and profit expectations are recessionary”. Kristalina Georgieva, managing director of the International Monetary Fund (IMF) has Tweeted that the “entire global economy will feel the economic ‘ripple effects’ of the war in Ukraine, with slower growth and faster inflation”.

It’s commonly held that rising US interest rates are bearish for gold, but in fact there is little correlation between interest rates and the gold price; the 1980s saw declining interest rates and a bear market in gold, while in much of the 1970s gold prices rose, in tandem with rising interest rates. According to the World Gold Council, there is usually a negative correlation between gold and interest rates. Higher interest rates are thought to push gold lower because of increased competition from higher-yielding investments.

Gold has traditionally been regarded as a safe haven asset at times of intense uncertainty and anxiety, such as now. The Dollar price hit $2,070 after Russia launched its invasion of Ukraine; Goldman Sachs has raised its price forecast for gold to $2,500 over the next six months, $450 higher than previously. Glint, the global gold-based payments platform makes gold easier: simpler to access, simpler to share and for the first time ever, a viable option to spend.

While we strongly believe that gold is the fairest and most reliable currency on the planet, we must point out that it isn’t 100% risk free. We have seen a steady increase over time but the value of gold can fall, which means the purchasing power of the customer can also fall.

Jason Cozens, Founder & CEO of Glint, says: “The markets have long been expecting this interest rate rise by the US Federal Reserve. This rate rise is probably just the first in a sequence that will push the US base rate to 2%, which historically is still a very low level. The Fed is in a very uncomfortable place. If it tightens credit and the money supply the US might face a severe recession; if it doesn’t, it may be criticized for failing to address inflation – even though the causes of this inflation lay beyond its shores”.

“We are living through deeply troubling and uncertain times. The Dollar’s status as the international reserve currency has been further chipped away by the news that Saudi Arabia may price some of the oil it sells to China in Yuan”.

“Gold will become increasingly important as an alternative to fiat currencies; the turbulence of today merely reinforces that. Glint has a vision of a global, gold-based alternative to banking, payments and money. We have the capacity and opportunity to build a significantly scalable financial eco-system, connected to, but outside of the existing banking and cryptocurrency systems”.

ENDS

Press information

About Glint
At a time of extraordinary monetary policy and when trust in currencies, banks and existing payment systems has been eroded, Glint helps us move to a more stable global economy. Glint is bringing reliability, independence, choice, and control to clients, by reintroducing the most universally trusted form of money, Gold.

Glint Pay Ltd. (glintpay.com) is a fintech company, based in London, Boulder (US) and Tokyo, that uses gold as an alternative global currency to enable its clients instantly to buy, sell, save, spend, and send their physical gold and other currencies, through the Glint Mastercard® and Glint App.

Glint offers no credit facilities, it allows users to transfer, receive and save real gold, which is secured in Brink’s vaults in Switzerland.

Glint is able to issue cards to clients around the world and can open accounts in over 200 countries. With more than 90,000 registered users, Glint has completed over $300million worth of transactions to date.

Glint is authorised and regulated by the UK’s Financial Conduct Authority which has given permission for Glint to issue electronic money (e-money) and provide payment services (FRN 900657).

Gold is not regulated by the FCA. However, Glint’s clients know their gold is secured in a Brinks Vault in Switzerland, insured by Brinks with Lloyds of London and their policy covers the replacement value of Glint client’s Gold as held in their vault.

The Glint card is issued in the UK by Glint Pay Services Ltd pursuant to licence by Mastercard International Inc.

Glint is a U.S.-based authorized Card Program Manager. Funds are held at Sutton Bank, Member of the Federal Deposit Insurance Corporation (FDIC), in an FDIC-insured account.

Glint Pay Inc. employs effective Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and fraud prevention systems and controls to mitigate and combat risks.

Whilst we strongly believe that gold is the fairest and most reliable currency on the planet, we obviously need to point out that it isn’t 100% risk free. Whilst we have seen a steady increase over time, the value of gold can fall, which means the purchasing power of the customer can also fall.

3.8% increase last week sees Gold break through $1900, pushing new highs.

Is it time you topped up?

Right now, we are witnessing a perfect storm in world economics. We have crippling inflation, currently 7% in the US, 5% in the UK and rising; we are witnessing unprecedented geopolitical unrest with Russia’s invasion of Ukraine seeing major cryptos plummet over night.

And what is gold doing? Gold is performing in the way that we have trusted it to behave for millennia; when things get tough, we see savvy savers putting their money somewhere safe, the hedge against inflation that helps protect their savings. Gold.

Last week gold smashed through the $1900 barrier and some pundits are saying that it will keep climbing past the $2000 high of 2020.

Here at Glint, we would never dream of offering you financial advice, but it might be worth you thinking about your savings right now. Could liquid, allocated gold with Glint be a better place for you to put your money than watching its value being frittered away, sitting in the bank?

It’s so quick, safe and easy to add funds to your Glint account and buy Gold in the Glint app.

Click here to follow some simple instructions to get you started.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

We see Glint as the key to unlocking the security of gold as sound money, money that can be used by everyone in their daily life. While gold goes up and down in price, over time it has proved a reliable store of value.

Thus, we are always on the look-out for cogent, intelligent and persuasive articles which give a provocative analysis of the current practices of central banks, those bodies which have the most profound influence over our fiat money system.

For that reason, we are delighted to publish here today an essay by Geoff Blanning. In his ‘Put the tools away now, please’ Geoff, who worked in the City for 32 years as an investment manager, savages the quantitative easing policy pursued by the Bank of England (and other central banks) and warns that the creation of vast amounts of new money “represents a debasement of every existing pound in your pocket and mine”. Geoff lays out how higher inflation inevitably follows the extraordinary amount of new money which has been injected into the global system.

Read Geoff Blanning’s ‘Put the tools away now, please’  White Paper here:
https://glintpay.com/wp-content/uploads/2021/09/Geoffrey-Blanning-Put-the-tools-away-now-please.pdf

Listen to the podcast here on Spotify: https://open.spotify.com/show/3QQoOfUpMqozX1Am2VoLRo

Watch our YouTube film here: https://youtu.be/qcUg1OSu8xk

The struggle to buy your first home is almost a universal experience; as with many things, the first step is usually the hardest. Once you’re on the housing ladder then you can enjoy the benefits of home ownership for the rest of your life, however, securing the deposit needed to get on the first rung is notoriously difficult and, for some, almost unattainable.

Some experts believe that we’re in the midst of a housing bubble. In the UK, the average house price jumped 13.2% over the last year to over £260,000, despite the freeze on Stamp Duty (the government tax on house sales) ending. Currently, UK house prices are around 30% higher than the peak before the 2008 financial crisis.

In the US, house prices are rising at the fastest rate in 30 years – up 18.6% in a year according to the S&P Corelogic Case-Shiller national home price index – driven by ultra-low mortgage rates and record levels of borrowing which has hit $4.6tn over the last 12 months.

With prices rocketing, first-time buyers could be forgiven for thinking the situation is hopeless and that home ownership will forever remain out of reach. ‘Generation Rent’ (young adults between 18 and 40) faces an uncertain future of unstable tenancies, spiralling rents and a lack of security which all collude to make it increasingly difficult, sometimes even impossible, to save enough to reach that crucial amount required for a deposit.

Research from the British bank Halifax recently revealed that the average UK deposit sits at £59,000 or around a quarter of the average house price. A staggering amount considering the average annual salary is around £31,000!

In the US, Federal Reserve Economic Data indicates that the average house price is $434,200 – if prospective homebuyers need an average deposit of 12% of the house price (as indicated by the National Association of Realtors) then they’d have to save over $52,000. This equates to 118% of the average income for men in the US, and 177% of the average annual income for women (according to U.S. Census Bureau).

12 years to save for a UK deposit but gold can provide first-time buyers with the tantalising prospect of home ownership 4 years sooner

Our research shows that if UK first-time buyers saved 20% of their salary it would take 12 years to save up the average house deposit. Of course, the issue is that as house prices soar by the time you’ve reached your target for a deposit, that amount is no longer enough to purchase the home you were saving toward.

Rather than accepting this as a depressing fact of life, there are alternative ways to save towards a deposit. Cryptocurrencies have enjoyed a surge in popularity since the Covid-19 pandemic began, particularly amongst Millennials. However, the volatility of cryptos ensures that these assets are not viable long-term stores of value. For example, double-digit overnight drops in value are far from unheard of; savers could see the value of their deposit plummet in the hours before finalising a property purchase. Of increasing concern are the reports of the reluctance of some lenders to approve mortgage applications of borrowers whose deposit has originated from crypto returns – some applications have apparently even been rejected outright.

Gold can unlock access to home ownership for first-time buyers. Rather than having to struggle for 12 years to gather a deposit, saving in gold would have allowed savers to reach their goal for a deposit in just 8 years, a third quicker than through cash savings.

Over the last 20 years, UK house prices have increased by 175% from £96,500 in 2001 to £266,000 today. Over the same period gold prices have risen much more quickly, up 559% from $275 to $1,812 per troy ounce, indicating that savers could have secured a house deposit much sooner by investing and saving in gold.

In the US, house prices have also seen a huge spike over the last 20 years – jumping 109% from $207,800 in 2001 to $434,200 today (according to Federal Reserve Economic Data). Again, while a huge jump, the growth in house prices is outperformed by the rise in the gold price.

Gold offers a solution in the US too. Our research indicates that to afford the average US house deposit of $52,100, male first-time buyers need to save for an average of six years, whilst female first-time buyers are forced to save for up to nine years. Analysis of historic gold prices shows that this deposit could be reached a year earlier, if prospective buyers saved in gold instead of cash.

How does gold compare to investments? Pretty well. In fact, gold has outperformed many other traditional investments, including the FTSE 100. These are the UK’s most profitable companies, yet shares have only increased by 29% in the last 20 years, from 5,537 to 7,151. Although the FTSE 250 has seen huge growth since 2001, up 296%, again gold has fared better over that period. By way of comparison, the performance of the FTSE 350 over the last 20 years is much closer to the FTSE 100 rather than the 250 – jumping 65% during that time.

US stock exchanges have seen much more substantial growth over the last 20 years. However, performance still lags significantly behind the rise in gold prices. Here’s a look at how the largest exchanges have performed since 2001:
• NYSE has jumped 137% from 7,094 to 16,846
• Dow Jones Industrial Average up 220% from 11,048 to 35,312
• Nasdaq soared 304% from 3,787 to 15,309

Clearly, gold has outperformed other assets over the last 20 years. While the value of gold can decline, meaning that its purchasing power can also decline, it has proven its reliability as a long-term store of value and prices are steadily climbing back to the highs of last year. Previously, access to gold was extremely limited but the digitalisation of gold through Glint has unlocked its access, offering all consumers a viable means of saving for the future.

The same trend is clear since the financial crisis too. Although house prices in both the UK and US have increased by more than 50% since 2008, gold prices have soared 147% over the same period. Gold has also dramatically outperformed many other investments over the long-term, including the FTSE 100, which has risen by around 75% since the crisis. In the US, exchanges such as Nasdaq have enjoyed huge growth since the lows of the financial crisis, driven by the meteoric rise of the tech powerhouses including Amazon, Apple, Facebook, Microsoft and Tesla. This growth may have skewed the figures in favour of the US exchanges but the simple fact remains – gold has risen much more quickly than house prices.

Gold could be the answer for those looking for an alternative to the seemingly fruitless task of saving for a deposit. Rather than swimming against the tide, investing in and holding gold could be the answer to make your dream home a reality much sooner than expected.

It’s been a busy week in the UK so far with several government announcements indicating exactly where we are in terms of our recovery from the Covid-19 pandemic.

Firstly, some positive news – the unemployment rate fell slightly to 4.8% but there were green shoots in terms of the jobs market with 657,000 vacancies, up by almost 50,000 on the previous quarter. Positive signs of recovery, at least in the jobs market. But that’s about it for good news, I’m afraid.

A closer look suggests that there is still a long way to go. We’re still far behind pre-pandemic levels with around 750,000 fewer people in employment than this time 12 months ago. In the US, the employment level is 10 million jobs below its pre-pandemic level.

Once again, the younger generation has been hit hardest with 289,000 fewer employees under the age of 25 on the payroll than 12 months ago – largely due to the higher proportions of workers from this demographic in the catastrophically hit sectors of hospitality, leisure and retail. This generation is at serious risk of being further left behind and the financial inequality that is already prevalent will only worsen.

We all knew the Covid recovery would take time so these figures, whilst still concerning, unfortunately aren’t that surprising. The biggest worry is the latest round of inflation figures as well as central banks’ acceptance of what appears to be rapidly rising inflation and their seeming reluctance to do anything about it.

In the UK, inflation more than doubled to 1.5% last month and there are signs that not only will we surpass the Bank of England’s 2% target this year, we’ll even hit 2.5%. In the US, expectations for consumer price inflation now range between 3% and 6%.

Last week, we also saw inflation figures from the world’s two largest economies. Unfortunately, these also made concerning reading – inflation rises in both the US (4.2% – discussed in more detail in last week’s newsletter) and China (0.9% although they have a target of 3% this year) meant that consumers are facing price hikes at the precise moment that they are beginning to rebuild after the pandemic. In China, there is potential for far worse to come as producer prices increased 6.8% over a year, the fastest rise since October 2017 – as the largest producer globally, there should be real concern if these increased costs are passed on to consumers.

As long as inflation continues to rise without intervention from central banks, consumers and savers will be hit. In the UK at least, the conversation around the introduction of negative interest rates won’t die down; add the £300bn borrowed to struggle through the Covid-19 pandemic and continuing quantitative easing to this climate of historically low interest rates and we have a perfect storm which devalues our cash and our savings by the day. According to the National Audit Office the UK has spent £372 billion so far on measures designed to combat the impact of Covid-19.

It’s difficult to see how central banks will rescue the situation, especially as there appears to be little to no inclination to increase interest rates. This reluctance isn’t surprising; there is fear of the markets sliding even further and interest rate rises could snuff out the embryonic economic recovery. However, the time to act is now before another generation is financially crippled for life.

US Treasury Secretary Janet Yellen might still think that there isn’t an inflationary problem, but she may soon be the only one.

With all the above factors in place, and central banks’ apparent disregard for the financial welfare of consumers, it’s no wonder that alternative currencies have flourished in recent months as consumers and savers search for value. Markets are down, ISAs offer minuscule interest; where else can we turn? Cryptocurrencies may have grabbed the headlines but, ever since Elon Musk’s hint that Tesla may sell its Bitcoin holding sent prices crashing across the crypto market, the average consumer will be understandably cautious about investing in such volatile assets. By comparison, although the value of gold can decline, it is up 11% in just six weeks and whilst still below last summer’s peak this appears to be the perfect opportunity for it to remind us all why it has been the ultimate long-term store of value for centuries.

Like many of you, we were glued to the Bitcoin vs Gold debate between industry heavyweights Michael Saylor (Bitcoin Billionaire) and Frank Giustra (Gold Billionaire). As expected, it was a fascinating discussion, with plenty of insight to digest.

The debate covered a huge range of key issues and arguments; we’ve reviewed and analysed some of the big talking points – as well as highlighting some of the major points that weren’t mentioned.

Asset comparison

According to Michael Saylor, Bitcoin is secure and possesses many of the characteristics of monetary gold, but without its “defects”. This echoes the classic standpoint of Bitcoin as “new” or “digital” gold and its devotees will undoubtedly believe this encapsulates the entire argument in just one pithy phrase.

Frank Giustra, on the other hand, clearly doesn’t. He makes a point we’ve demonstrated on these pages many times over the last few years – Bitcoin has never been tested in a crisis, whereas gold has been valued, relied upon and trusted as both a means of saving as well as money, for centuries. Gold has stood the test of time.

Giustra also questions whether Bitcoin will be accepted as a mainstream method of payment. Whilst Bitcoin and other cryptocurrencies are easily accessible as a store of value, it’s much more difficult to actually spend them. Whilst some of the world’s largest retailers and companies do accept payment in Bitcoin and the number is growing, it’s still very uncommon to be able to use cryptos with smaller businesses. Until this changes, Bitcoin isn’t a viable alternative as a means of everyday exchange, he argues.

There are two other major factors that are likely to prevent Bitcoin from establishing itself as an everyday currency – slow transaction processing times and high fees. Bitcoin has only been able to process a maximum of seven transactions per second and there are many factors which can slow down transactions – taking as long as five days in 2018. In terms of fees, Bitcoin transactions are prohibitively expensive – the average fee over the last week is around $45, meaning that it is an unviable option for most everyday purchases… imagine spending $5 on a coffee and being hit with ‘gas’ fees of $45!

Risk factors

As Frank Giustra highlighted, quantifying the risks of Bitcoin is hugely important. Whilst we all know that investments can fall in value as well as increase, Bitcoin can sometimes be positioned as an almost risk-free asset – this is very dangerous, especially as it is such an attractive proposition for private investors.

However, as Giustra pointed out, Bitcoin shouldn’t be worried about gold; “central banks are the ones you need to look out for”. This is a crucial point that we’ve raised here many times. Governments need to control their currency, making ownership of cryptocurrencies illegal could easily happen. We’ve already seen it in China and India is once again looking to ban Bitcoin. What would be the impact of this? It is likely to curtail Bitcoin to the point where only a minority use it. This could have a catastrophic impact on its value and the portfolios of its holders.

On a related note, Bitcoin is unregulated. It is the wild west of global currencies; this doesn’t put off investors, in fact for many the lack of regulation is another advantage of Bitcoin (our debate preview delved into regulatory details). However, this also makes it very attractive to manipulators as well as another potential threat to governments – PayPal Founder Peter Thiel recently went as far as describing it as a “Chinese financial weapon”.

Once again, taxation is key. Governments won’t want to risk losing out on potentially billions in tax revenues whilst an unregulated, anonymous currency like Bitcoin flourishes. Many believe it is inevitable that central banks will look to control or curtail cryptos – in the UK, we’ve recently seen clear signs of this as the Bank of England announced the launch of a Central Bank Digital Currency (CBDC) taskforce; what is a CBDC if not an attempt to intervene in the digital currency arena?

Historical performance

No one questions the longevity of gold and its role as currency throughout moments of monumental change throughout history. However, Bitcoiners often claim that gold has had its time and suggest it is no longer fit for purpose – this is incorrect as Glint’s payments ecosystem allows gold to be spent as an everyday currency whilst also performing its timeless role as a store of value.

Saylor claims that Bitcoin has matured as an asset and is appreciating at 200% per year. This seems unsustainable – Giustra suggests as much by remarking how it “sounds more like a bubble environment than a store of value”. Whilst Saylor claims that Bitcoin is an asset rather than a currency – which should be held over the long-term – what happens if this does turn out to be a bubble?

Regardless of the hugely impressive recent performance of Bitcoin, there is one irrefutable point – Bitcoin has not been tested over the long-term and has not been around long enough to demonstrate its viability as a store of value.

Supply dynamics

Saylor made one particularly revealing comment during the debate: “Gold is a commodity, Bitcoin is a scarcity”. This provides a fascinating insight into how he, and no doubt, many other Bitcoiners, view gold’s position. Gold is a finite resource, we cannot simply create more of it – this is part of its intrinsic value and why it has been viewed by many as a trusted and reliable asset for thousands of years.

On the other hand, Bitcoin is created by humans. There may only be 21 million coins in existence but who’s to say this cannot change? History is full of surprises that were seemingly impossible, until they happened. By its very nature, Bitcoin is subject to human intervention and at risk of corruption – whether that is caused by the best intentions or through malign forces.
This poses an interesting question, does the supply dynamics of Bitcoin prevent its use as a currency? We’ll find out soon enough.

Ownership

Gold ownership is widely spread amongst people around the world. The world’s central banks only own 17% of the world’s gold.

The complete opposite is true of Bitcoin. A recent Bloomberg article revealed that 95% of Bitcoin’s market cap was owned by only 2% of wallets; even if the figure is lower (71.5% according to other research), these ‘whales’ hold undue influence over the asset and can impact its already high volatility – 75% to 125% compared to 8-20% for gold.

One of the most telling points made during the debate was Giustra’s anecdotal suggestion that Larry Fink, CEO of Blackrock, sees little real institutional investment in Bitcoin. It will be fascinating to see if this changes over time.

Market forces

“None of us have experienced an investment climate like today” – Giustra’s words certainly put 2021 into context. This supports his message to private investors of the importance of diversification. And for many, gold is the ultimate hedge in times of uncertainty.

Of course, more big-tech and finance companies are embracing Bitcoin – Tesla being one of the highest profile recent institutional investors. Saylor clearly believes that this is only likely to accelerate in the future. However, as Giustra highlights, Bitcoin isn’t owned by any central banks and it is highly debatable that it would become a reserve currency. This is partly down to a need for control and is one of the motivations behind the development of CDBCs.

Bitcoin appears to be behaving like a growth stock, time will tell how it performs over the long term.

Glint’s view

As expected, it was a forthright and hugely insightful debate, but the panel missed out on the opportunity to cover some crucial topics. Some of these we discussed in our preview earlier this week.

Firstly, it is a shame that the discussion focussed on the two assets as a store of value and offered little in terms of gold as a means of exchange. Giustra believes that gold is no longer used as everyday money, whilst Saylor even claimed it is a myth that gold is money – the opposite is exactly what Glint offers with its global payments ecosystem allowing clients to spend, save and share real gold through our app and Glint Mastercard®.

Also, the scalability of gold as a currency wasn’t discussed. Through the digitalisation of gold with Glint, instant and secure cross-border payments in real gold are possible at the touch of a screen, these don’t require huge amounts of energy either, which is often one of the main criticisms of Bitcoin.

Finally, gold is increasingly relevant to younger consumers – recent research from the Royal Mint shows a 32% increase in millennials turning to gold. Through Glint, gold can now be used in the same way as many cryptocurrencies – traded, spent and sent to friends and family. We’re working hard to develop a payments alternative that positions gold as a relevant and viable currency for the 21st century.