Diversifying into digital gold
We interviewed Frederic Panizzutti, Managing Director at MKS Dubai, to discuss the advantages of digital gold for investors.
Can you provide an overview of the current outlook for physical versus digital gold?
Although physical gold has been in use for thousands of years, digital gold is a relatively new concept. The key differentiator lies in the way one gains access to it. A well-structured digital gold product, backed by segregated gold with direct legal ownership, is essentially the same as physical gold. The difference lies in the convenience and potential of the digital format. With digital gold, you can buy and own physical gold without the hassle of shipment, storage, and insurance. Selling is also easier, without the need to find a buyer or face potential discounts. It's a win-win situation.
Is digital gold a safe investment?
When considering the safety of digital gold, we need to address two aspects:
1. The safety and reliability of the technology:
The construction and mapping of the digital gold product to the underlying gold are crucial. Various gold tokens exist in the market, each offering different levels of security. It is advisable to choose a well-designed product backed by an experienced and reputable organization in the gold market. MKS, in collaboration with leading institutions, has developed a gold token called DGLD, which utilizes a proprietary integration with the Ethereum Network. This ensures the trustless immutability of the DGLD token and the record of gold ownership. DGLD holders can independently verify and prove their unique ownership of insured LBMA-grade allocated gold, stored in secure vaults in Switzerland, without relying on any third party. This guarantees that the ownership of allocated gold cannot be reassigned or double-spent by anyone, including the issuing company.
2. Investment safety:
A digital gold product that is fully backed by physical gold, with complete ownership title to the gold stored in a secure vault in a reputable country and fully insured, such as the DGLD product mentioned above, is as safe as directly owning physical gold. In fact, digital gold eliminates the need for transporting gold when buying or selling, reducing further risks. One could argue that digital gold is even safer.
Why do investors include digital gold in their portfolios?
When done correctly and backed by physical gold, digital gold is just as good as physical gold. Investors seeking to protect their portfolios by diversifying or mitigating volatility in other markets, or those looking for a safe haven or directional price movement investment, can easily opt for digital gold instead of physical gold. It offers the same advantages with easy access and without the constraints associated with physical gold.
