Digital Gold is a good option for those who either cannot afford physical gold, want diversification options, or prefer to have most of their money in digital assets.
We will be comparing two options today.
Just Hold It
We’ve spoken ad nauseum about how important it is to move some of your cash over to gold, by any means necessary. There are four main ways to do this. We explained here.
IMO, only a fool would hold zero gold. Fortunately, there are enough ways to where everyone in the world, regardless of status, can do this.
Just as I mentioned above, options are good. Digital gold is NOT the best option for holding gold, by any metric, but it does offer advantages.
- Super convenient
- Can move money in and out quicker than any other method
- A good hedge against other means of holding gold
Not everyone agrees however, and it’s important to listen to the other side of the argument. This is not a great video IMO, but let’s hear the man out and break it down.
Some thoughts on the video…
- Good point about having double counter-party risk with the custodian AND the ERC-20 token, this is true
- The chances of those “risks” becoming a real thing however are very low in my view. If they start bubbling up, you can easily move out of your position in seconds, unlike more standard methods.
- Bitcoin is NOT digital gold, please know this. It is inferior to gold because of its incredible volatility. It is superior to gold because of its finite 21 million BTC. But they should never be compared to each other in that way.
I would be okay with anyone going the true digital gold route, but you should never go in blind, so let’s compare the top two options in terms of overall market cap — PAXG and XAUT
From the PAXOS group, the company behind USDP and BUSD, comes PAXG.
Similar to what a lot of the gold ETFs do, PAXG claims to have actual 400 oz London Good Delivery gold bars, stored in a Brinks security facility. You will own a portion of these bars depending on how much you invest obviously.
They are audited, and are backed by the New York Department of Financial Services. So the “claims” do seem quite legit.
Your gold is allocated, which means they’re not loaning it out, which is very important.
You are charged ZERO for storage fees too, which let me tell you, does not exist with any other storage method.
You will sometimes have to pay a bit of a premium depending on demand, so don’t expect spot prices, but be happy if you do get them.
This style of ownership means you’ll never actually stand for delivery (though I think you actually could), but it gives you maximum agility to move in and out of your position should you want to, and with minimal fees.
PAXG currently sits at 82 on CoinGecko’s Market Cap Index.
From the folks who brought you Tether, there is a new player in the digital gold market, and it’s making a splash.
You can find their info page here.
Appears to be very similar to PAXG. Same method of holding, and you can apparently use their “look up” site to check the serial numbers, though no address is given on the site.
Advantages – 24/7 support. This is not something you see very often in the crypto world, even in your more centralized options, which these gold products absolutely are (kind of have to be).
Disadvantages – Pretty much everything else. Let’s get the major one out of the way. Minimum purchase is 50 oz of gold, which right now stands at about $85,500 on July 21, 2022.
This is for bigger investors and institutions. You have to set up an account with TG Commodities Ltd before you do anything here.
Once you want to cash out, you can simply do it for cash, assuming they can sell your gold. Of you can collect physical gold, but you have to send it to a Swiss address. Yeesh.
Why not just use a regular offshore gold shop that offers storage? Where is the real advantage over that?
Plus it’s from Tether, which has been in some degree of hot water since 2017.
Now there does seem to be alternate ways to hold XAUT apart from what I’ve just mentioned. This video shows a way. Unfortunately, I have no idea what this woman is trying to say, even though she’s speaking English.
Despite all of this, XAUT sits as high as 98 on Coingecko’s Market Cap Index. So it is a service people want apparently.
I am not a licensed financial advisor, so don’t do anything I advise.
But even though there are other smaller options, when it comes to having custody over your gold, bigger is usually better. I mean, would you really want to use something with a tiny market cap for something like this? Hard to trust.
PAXG seems to be the move here. Paxos has weathered the stablecoin storm so far, and seems like a very legit and buttoned-up option.
Plus, everyone can use it, which makes it the obvious choice for most people here.