The article is written by Jason Peckham. He grew up on a farm in Kwa-Zulu Natal, South Africa. He qualified as a civil engineer before moving towards FinTech, and is currently an Analyst at Invictus Capital. He believes that an efficient global financial system is important for human progress.
Spurred by a tailwind of macroeconomic forces, gold is poised to overcome all-time highs. As anticipated, the seemingly infinite money supply provided by central banks is proving favorable for assets with a finite supply. The total stimulus from global governments in half a year is triple the entire 2008 financial crisis. Not only has this brought a wave of optimism for gold prices, but stocks and digital currencies are also jostling for portfolio allocations. The uncertainty of future economic outcomes makes allocating capital to an uncorrelated asset class a favorable bet.
The precious metal is under no obligation to perform, however. While stocks enjoyed a bull run over the past decade, gold recorded lesser gains, tarnishing its appeal. This time, the broader market context along with recent price action could start a rush. And now, gold-backed digital assets give the unmistakable metal a technological glint.
Through tokenization, the options available to investors expand beyond physical gold bars or ETFs. Having played a significant role in human society for millennia, gold’s digital transition combines it’s physical scarcity with digital availability.
The Gold Shield
The COVID-19 pandemic is causing a change in habits as society reconsiders previously accepted social norms. One of these is money, used globally as a medium of exchange. But fiat currencies are not the only form of money. The U.S. dollar was once backed by gold, permitting physical gold redemptions, but this system was disbanded in 1971 as the United States effectively ran out of gold to satisfy the demand for redemptions. This has since proven favorable for gold, which has gained value relative to fiat currencies. The graph below compares the value of national currencies to gold over the past century, showing a drastic drop since 1971.