The current blockchain revolution is now targeting the lucrative gold market.
Gold Markets Eye Crypto Boom
Bitcoin public online ledgers have caught the eye of exchange owners such as IEX Group Inc. and TradeWind Markets who are rolling out technology that will bring gold into the digital age.
Currently, around $27billion of gold changes hands on a daily basis through land-based markets. However, over-the-counter markets can often take days to settle, leaving a considerable price risk for both buyers and sellers. Blockchain offers greater transparency, quicker deal times, and better security for traders, potentially attracting investors who have been soured by the recent performance of gold-backed funds over the last decade.
JPMorgan Asset Management’s Ebele Kemery reported that digital gold stood to take market share away from other gold instruments, including physical bullion, ETFs, and futures. In addition, the use of technology could create a further avenue for gold that investors might look towards to find value.
Live Price Chart – Gold
TradeWind platform tests gold trading tech
TradeWind is using blockchain for a tech platform that would work by matching sellers of gold bullion with buyers. They also offer a distributed ledger to handle any trade settlement, record keeping and account management. The company anticipates being ready to launch its product by late 2017 or early 2018. The major advantage for traders is that payments and ownership of the bullion will be instantaneous and secure.
In addition, further successful tests have been carried out on a clearing system to move dollars through the Federal Reserve and transfer ownership of the gold in London vaults. Once again, the service is expected to launch at the end of 2017.
Physical delivery issues
Despite the ease of trading and clearing, blockchain won’t solve the problem of physical delivery of the gold. Furthermore, customers still have reservations surrounding the storage of gold bullion in commercial vaults around the world because of the risk of bankruptcy. In order to move stored gold, you would need a truck, and this is a logistical problem that blockchain can’t solve.
As clearing and delivery can take a few days, many investors are protecting themselves by using a hedging tool to guard against interim price fluctuations.
Despite a few trader reservations around the physical aspect of delivery, blockchain looks set to successfully move gold trading into the tech age in the very near future.
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