A digital token backed by government guaranteed gold has been launched. The Perth Mint Gold Token (PMGT) is issued by commodities digitisation company InfiniGold and is traded on the global cryptocurrency exchange KuCoin.
Perth Mint claims this is the world’s only digital token backed by government guaranteed gold.
PMGT does not charge custody, storage, insurance and management fees. The minimum investment is 0.00001oz of gold, approximately AUD 0.024 or USD 0.016 – which, the Mint says fits with the project’s ethos to bring digital gold to the masses.
The Perth Mint is the world’s largest refiner of newly mined gold, and a member of the London Bullion Market Association (LBMA). It currently safeguards wealth valued at more than AU $4.5bn within its vaults for clients ranging from central banks and sovereign wealth funds to individuals. It is now also the custodian of the physical gold backing PMGT.
Each token is underpinned 1:1 by Perth Mint digital GoldPass certificates which represent physical gold held in storage at The Perth Mint. In addition, the weight and purity of every ounce of gold anchoring PMGT is assured by the Mint’s sovereign owner, the Government of Western Australia, which holds a long-term AA+ credit rating to provide unprecedented surety to investors.
The providers say that with zero fees for custody, storage, insurance and management, PMGT is a cost-effective gold asset and a competitive alternative to traditional gold products, like gold ETFs, banked gold transfers and more. PMGT is also fungible, ie interchangeable, with traditional gold markets such as CME gold futures and the interbank Loco London Swap market.
The providers also says that ‘unlike the opaque reserve management of competing gold and fiat-backed digital tokens, the amount of gold backing each PMGT can be verified in real time against the gold holding balance of InfiniGold’s GoldPass accounts published by the Perth Mint without having to wait for monthly audits to see that the tokens are 100% fully backed.
It's known as a risky investment but, in what's being touted as a world first, Perth Mint is preparing to launch its own cryptocurrency, with one key difference.
Posted by Today Tonight on Wednesday, February 14, 2018
Andreas Ruf, chief executive officer of InfiniGold says: “As The Perth Mint is the largest refinery of newly mined gold in the world, we’ve got an unprecedented depth of liquidity to bring to the market with the Perth Mint Gold Token. We haven’t simply purchased a couple of gold bars, put them in a vault and then tokenised them. We can tap into billions of dollars worth of gold stored at The Perth Mint.”
Johnny Lyu, co-founder of KuCoin said: “We’re really excited to be listing the world’s first token which is backed by a government guarantee on the underlying asset. This is another step forward in our mission to spark mainstream adoption of crypto-assets.”
Jason Hollands, managing director, business development and communications at Tilney Investment Management Services said: “In my view, most UK based investors wanting to take an investment position in gold, will be doing so within a broader portfolio, such as a pension or ISA, and therefore a low cost gold ETF, listed on the London Stock Exchange, such as the Invesco Physical Gold ETC, that can held within an ISA or SIPP, will be of far more interest and convenience than a digital token on a crypto-currency exchange that cannot be held within these core UK tax efficient investment accounts.”
Meanwhile, Joe Foster, portfolio manager and strategist at global investment manager VanEck, reflected on the price of gold and on the application of ESG criteria on the gold mining sector which he thinks has shortcomings as it is currently being used.
Gold price he says is not indicative of physical demand: “The World Gold Council (WGC) reported that total gold demand fell 1% in 2019. Consumer demand for jewelry, bars, and coins was especially weak, falling 11% to a decade low. Given the decline in demand, the rise of the gold price by 18% in 2019 was mainly because gold behaves more like a asset than a commodity.”
Meanwhile Foster says the ESG movement and allegiance with fuel pollution needs some drilling down of its own.
“There is a tremendous amount of discussion, controversy and politics around the impact that pollution will have on the environment in the future,” says Foster. “Out of this has emerged a broad-based movement to mitigate the threat that pollution poses. For an investor to compare the ESG performance of a mining company to a retailer, aerospace, or semiconductor company is disingenuous. Generally, the closer a sector is to the consumer or end-user, the lower the ESG risk.
“Managing environmental and social risk is nothing new to gold companies. In fact, it is among the most important aspects of their business. But, if investors avoid the broader mining industry due to what we see as unrealistic or misguided ESG expectations, the industry may become starved of capital needed to maintain production.”
Further reading: Gold Exchange Traded Commodity from Royal Mint