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Category: Gold

Investors trapped in cryptocurrencies rush to gold

Individual demand for gold has seen an increase this year as investors seek to move their money from volatile “lobster pot” cryptocurrencies t...

19 January 2018


Individual demand for gold has seen an increase this year as investors seek to move their money from volatile “lobster pot” cryptocurrencies to a safe haven. Glint speaks to the experts about the developing relationship between gold and coded assets

Gold and precious metals have seen a rise in demand following the price collapses and ongoing volatilities across cryptocurrencies. Having reached almost $20,000 at the end of 2017, bitcoin, the flagship for the cryptocurrency movement, has since halved in value before returning to $11,660 today.

Such fluctuations in the crypto-market, reports of hacking and continued government opposition to cryptocurrency trading around the world, have seen individuals sell their crypto and rush into gold.

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“We have been inundated with emails and the phones have been ringing continually with customers asking how they could turn their cryptocurrency into gold,” said Daniel Marburger, director of Frankfurt based CoinInvest. “It is an unprecedented time and shows the sway from bitcoin and other cryptocurrencies back to a solid, robust investment in these uncertain times.” Sales of gold reportedly leapt fivefold as bubble wary crypto-investors took their money out of a market predicted to collapse following growth of 1,400% last year.

Ross Norman, CEO of St James’ bullion provider Sharps Pixley, reported customers as young as 25 coming to him with laptops containing bitcoin code they wanted to convert into gold. One wanted to move 1,000 bitcoins, worth approximately $1 million, into gold. Such high trades were happening every couple of weeks; although it may not be a direct correlation with bitcoin’s price drop.

However, there were advantages in moving digital code assets into gold he said. “If you’ve got a large position in cryptocurrencies, let’s say £1 million, these exchanges only allow you to sell around £10,000 a day. It’s a lobster pot, very easy to get into, very hard to get out of, therefore, if you’ve got big profits it’s very difficult to redeem. Gold however, is pretty unlimited in terms of how much bitcoin you can sell for gold. So for those in the uncomfortable position of having large profits and not being able to take them, they have very few options but gold is one of them.”  Norman emphasised the difference in the asset classes but said the contrast was an interested one: “In short, it has had some impact on the gold market”.

Gold is not the only tangible asset to benefit. Tony Dobra, executive director at historic bullion merchants Baird & Co, told Glint he had seen a rush to other precious metals, not just gold, “silver is the one people are piling into”. While gold investors tend to stay close to the yellow metal those holding other metals such as silver, platinum, palladium and rhodium in diverse portfolios were those most likely to have cryptocurrency exposure he said. “They’re now coming out of crypto. Today in particular, we’ve seen demand from guys in Asia moving back into silver.”

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While demand for gold has spiked, Dobra saw little immediate correlation between a crypto collapse and the price of gold. “You’ve got to bear in mind the demand from funds and central banks is much bigger than any small investment area.” For 2018 he was bullish, pointing to a good start for gold and saying the paradigm for price determination remained its relationship with fiat currencies and other commodities such as oil. “There’s more of a correlation between crypto and equities. Both have been riding high and equities have backed off a bit over the last few days as well. People are sobering up in January and having a bit of a reality check.”

In the City’s Goldsmiths’ Company, the superintendent assayer of the London Assay Office, Will Evans, told Glint the contrasts that have seen movement from crypto into gold extend to security, as well as liquidity and volatility. “Gold is a physical, tangible product you can hold in your hand. Once your gold has been independently verified, or hallmarked, or certified by a third party you can trust, you can physically store it.” While the use of blockchain made traceability inherent for bitcoin, it cannot prevent hacks or duplication.

Although cryptocurrencies gave users a freedom from government control, akin to gold, it was much more illiquid said Evans. “People who use gold as a currency hedge, may look at using bitcoin. But one of the issues with cryptocurrency is the liquidity of it. Getting money you can spend out of the system, there are a lot of reports of that not being straight forward.”

The launch of Glint now allows users to store and spend gold as currency with the full independence and liquidity sought by many cryptocurrency investors. Speaking at the launch of Glint last year, CEO Jason Cozens said “Why should its purchasing power be diluted over time? The emergence of, and interest in, cryptocurrencies is a clear demonstration of this world view. However, unlike gold, cryptocurrencies are not universally trusted. Gold is accepted globally, anytime and anywhere. Glint’s ability to use gold as money in electronic payments is an unprecedented event and gives us all the tantalising opportunity of a bottom-up return to sound money.” [Full disclosure]

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