The main benefit of gold as an investment is well known: as, unlike fiat currencies, gold keeps its purchasing power over time, it protects its owner from currency debasement.
On top of that, gold is highly liquid, actually, it's the most liquid asset on the planet: gold gets accepted everywhere in the world
as money, i.e. as a means of payment. Its value is recognized virtually by
But gold doesn’t equal to gold: there are gold bars and coins, which can be kept at home; there is gold that can be deposited in some vaults by third parties; there are gold certificated, shares of gold ETFs, gold miners stocks, etc.
Investing in gold requires answering some basic questions:
- Where are we going to store it? Is there a secure
place in our home? Or should we let it store in a vault? But how trustworthy is
- What use do we have for our gold?
Is it just an asset, which we use either as a short-term speculation vehicle or
as a long-term investment?
Or do we want to use our gold
directly as money, i.e. in order to buy goods and services?
- What about premiums and taxes?
- Instead of gold bars and coins,
should we go for gold jewelry?
- Whom should we buy gold from? How
and who should be selling our gold to?
And so on…
are simple questions, but they can require a lot of time and energy in order to
Traditionally, there were three vehicles
allowing investing in gold:
- Coins and bars, either stored at home or in some
- Shares of gold mining companies.
- Gold derivatives: basically these are debt securities,
whose value is pegged, to a varying degree, to the price of gold. The most
commonly used gold derivatives are gold futures, the share of ETFs (Exchange Traded Funds) or ETCs (Exchange Traded
Commodities), and options.
Recently, with the advent of
blockchain and cryptocurrencies, another gold investing vehicle was born:
gold-backed cryptocurrencies, i.e. gold-backed stablecoins.
Stablecoins are cryptocurrencies
specifically designed to keep their price stable. They are the solution to the
main issue of traditional cryptocurrencies: that price volatility which keeps
them from being deployed as currencies.
Stablecoin achieves the goal of
price stability through different strategies. For some of them, the strategy
consists of backing each coin with a given quantity of physical gold.
Currently, the gold-backed
stablecoins project with the biggest ITO and the biggest market capitalization
Source: PWC.ch - Strategy & ICO STO Study
Kinesis offers two currencies:
KAUs, backed by gold, and KAG, backed by silver.
Each one of Kinesis gold stablecoins is backed by
1 gram of gold. In fact, each Kinesis stablecoin represents the title of ownership
of 1 gram of gold:
"Each Kinesis KAU and KAG is
directly allocated with the corresponding weight of physical precious metal.
This allocation is always on a 1:1 ratio.
Allocated legal title remains
with the holder of the Kinesis currency, ensuring that proportional ownership
of the allocated gold and silver always resides with the KAU and KAG holders. The
bullion behind the Kinesis digital currencies will never appear on the Kinesis
balance sheet, this reduces counterparty risk when choosing to hold your
bullion with Kinesis."
This exclusive title of ownership
of the gold and silver represented by the Kinesis coins are the legal basis for
the right of Kinesis stablecoins holders to redeem their coins and take
delivery of the underlying physical precious metals.
Featured image from Wall-Street.com