Investing in precious metals like gold and silver has been regarded as a hedge against fiat currency inflation. During an economic downturn, you might notice that more people tend to invest in precious metals. A UK-based gold dealer even claimed that he ran out of gold coins and bars due to increased demand during this economically turbulent time.
While investing in gold and silver has been a popular means of diversifying one’s portfolio, it may have its drawbacks such as high costs, fees, and taxes. But with the tokenization of precious metals via blockchain technology, these issues may become obsolete.
What Is Tokenized Gold and Silver?
Tokenization refers to the process of transforming ownership and rights of assets into a digital form that is usable on a blockchain, with each token representing a share of ownership in the underlying asset.
You might be familiar with non-fungible tokens or NFTs whereby unique, valuable items such as art, music, and collectibles are tokenized. In a similar vein, commodities such as gold, silver, and other raw materials can also be tokenized. The only difference is that NFTs are the assets themselves whereas tokenized commodities represent real-world items.
While they may not be unique, non-interchangeable digital assets, tokenized commodities allow an investor to own even a small amount of the asset.
Why People Invest in Gold and Silver
Before we get into the benefits of investing in tokenized assets, let’s look at why gold and silver as precious metals have been very much sought after and are considered worthy investments.
1. Unique physical properties
Let’s face it — precious metals are enticing and valuable. This is not just because of their shiny appearance but also the fact that they are durable. They can essentially last for a long time and yet they can also be shaped into different forms. The malleability is what allows precious metals to be turned into coins, bullion or jewellery.
Gold and silver have limited supply. As such, it is deflationary by nature and the price either appreciates or remains constant. When something of value is scarce, there is always demand. And so, gold and silver usually perform well even during a recession.
3. Universally and consistently valued
Since gold and silver are inflation-proof, their value remains constant throughout time. These precious metals—once their properties are known and appreciated—have been universally valued ever since before century era and continue to spark interest today.
4. Generational investment
Precious metals have been used as a generational investment. They are typically passed down from one generation to the next as family heirlooms. While their value may seem constant in a short period of time, it shows an upward trend in the long run. So if, for example, the fourth generation decides to sell the family gold, they may gain some profit.
The Issues With Traditional Commodity Market
Let’s take gold as an example.
Gold’s supply is relatively constant and so it’s considered an efficient asset for diversifying your portfolio, especially during inflation or economic downturn.
The 3 main ways to invest in gold in the traditional market include:
- buying physical gold
- trading gold ETFs
- through gold certificates
While these methods do give the result of adding gold assets to an investment portfolio, they come with a set of drawbacks.
Buying physical gold, especially gold coins, is the most reliable and easy to obtain. However, if you want to purchase a higher quantity, you may face the problem of keeping them secure. Most investors would keep the gold bullion in a trusted vault and that would require additional fees. The same goes for transporting the assets from one place to another.
Trading gold ETFs is just like buying shares that are backed by real assets. This is a more convenient way to trade than physical gold. You wouldn’t have to worry about storing them securely. However, with gold ETFs, you don’t actually own the asset per se and you can only redeem it for cash, not the gold itself. Moreover, every time you buy and sell a gold ETF, you would need to pay a commission to the broker i.e., the third party. Any profits you make must be reported as tax.
Gold certificates represent your claim on a specified amount of gold. Just like gold ETFs, they are easier to exchange and you don’t have to worry about storage. One major drawback is that they are as good as the company issuing them. So if the company goes bankrupt, you may lose all your investment.
Why Investing in Tokenized Gold and Silver Is Better
The two main issues with traditional commodity trading are high fees and logistical complexity. For years, there wasn’t really a solution and investors would deal with the drawbacks.
Now, there is an alternative thanks to the advent of blockchain technology.
Asset-backed tokens are similar to gold ETFs but with added security and minus intermediaries, meaning cheaper and more efficient trading.
Benefits of trading tokenized gold and silver
- Fractional ownership: you don’t need to purchase a full gold bar and can instead invest in one you can afford.
- Increase efficiency: since there are no intermediaries or third-party involvement, trading tokenized assets are faster and cheaper as no operational cost is imposed.
- Increase liquidity: tokenized assets on decentralized exchanges have the potential to make traditional assets more liquid as transactions are more rapid.
- Promote transparency: tokenized asset trading is done on the blockchain which means transactions are recorded in a transparent, permanent, and immutable manner.
- Support financial inclusion: anyone regardless of financial status or economic background can invest in the gold market by buying micro or macro amounts of the tokenized asset.
In summary, you can invest in tokenized gold and silver in a more secure, easier, and cheaper way.
How to Start Investing in Tokenized Gold and Silver on TijarX
Investing in gold and silver-backed tokens has never been easier.
With the Sahal wallet, the gateway to the entire MRHB ecosystem, you can invest in tokenized gold and silver on TijarX commodity exchange in a matter of seconds.
Tokenized assets on TijarX are 100% backed by fully allocated gold and silver bullion, redeemable, and secured by the Gold Silver Standard of Ainslie Bullion Group Australia.
1. Download Sahal wallet
2. Navigate to TijarX platform
3. Add ETH and USDT
4. Buy AUS or AGS
You would need ETH to cover gas fees and USDT to purchase tokenized gold (AUS) or silver (AGS).
Access the decentralized commodity exchange via Sahal wallet in a matter of minutes!