- Precious metals and NFTs seem to be at opposite ends of the investment spectrum.
- Daniel Fisher, head of bullion dealer Physical Gold, sees major opportunity in combining them.
- He told Insider the two ways gold or silver can leverage blockchains to create investable assets.
Precious metals and NFTs (non-fungible tokens) are seemingly at opposite ends of the investment spectrum, with totally different market fits.
On one hand gold is embraced by people who want time-tested, tangible, safe-haven investments that can store value reliably. While not exclusively so, this group leans toward the older end of the human lifespan.
NFTs on the other hand are the territory of risky speculation, where the returns can be spectacular, but the falls in price are at times dramatic.
They are based on blockchains and require a decent amount of technical knowledge to engage with. The market for them is predominantly the relatively young, with some exceptions of course.
Against this backdrop you may well think combing the two would result in an ill-conceived clash of tradition with modernity that would please nobody. Too risky and speculative for gold fans, not exciting or potentially lucrative enough for the NFT crowd.
It might not be that simple though. Daniel Fisher, managing director of bullion dealer Physical Gold sees a huge amount of potential in combining precious metals with blockchains, especially now, when the broader markets are so volatile and the outlook for inflation and interest rates is less certain.
“When we have conversations with our bullion customers, half the time we’re talking about crypto with them as well,” he said.
“I think there’s actually similarities in mindset with these investors in that they want to move away from fiat currency. They want to take control of their finances and maybe don’t trust the banking system. So, I find there’s a big crossover between those buying bullion and those buying crypto,” Fisher told Insider in a recent interview.
Fisher sees two broad ways that the precious metal market and NFT tech can combine forces.
Firstly, NFTs could be used to establish ownership rights of specific pieces of precious metal without having to take physical custody. A gold bar or silver coin could be tied to an NFT, and instead of having to store the metal and ship it around as it’s traded, just the token would be needed. The tokens would be redeemable for the physical asset, if required.
“There’s obvious advantages,” Fisher said. “First of all, with this kind of electronic ownership you save all the costs associated with buying physical bullion. You pay a premium for gold coins to be minted and actually made, you also pay a cost for transportation, and storing it yourself or at a vault.”
While you could point to the option of simply buying a tracker fund tied to the gold price, this is not directly comparable as it merely gives you exposure to the value of gold, and has none of the features of owning specific bullion.
Fisher also noted that valuations of gold bars and coins can vary greatly based on factors completely separate from their weight. Different bullion providers can commend varied pricing based on their prestige and the specific designs of the bars and coins.
Famous Swiss bar manufacturer PAMP, for example, has a range of different designs on its bars such as floral patterns. This kind of speculative element would lend itself well to NFT collecting and trading, Fisher said. Each unique bar could be owned both as an online jpeg and a right to redeem physically.
The second type of precious metal NFT Fisher sees as an attractive option is as an add-on to owning physical gold, rather than instead of it. It is something his firm Physical Gold is currently developing and planning to launch soon.
He said most of his customers have a strong preference for having physical possession of their gold but are increasingly getting involved in crypto as well, so his firm is leveraging NFTs in another way.
“We actually tell our customers not to speculate and take risk, even with ETFs. If you buy 10,000 pounds of a gold ETF you’re not guaranteed that actually there’s 10,000 pounds worth of minted bars being held for you. A lot of the time they’re leveraged so there may be 2000 pounds or 3000 pounds worth of actual bars. If everyone tried to sell at the same time there may be an issue.”
“What we’ve thought is that we can combine NFTs and the supply of physical gold bullion. So the idea we’re working on developing is you’d come onto our website and you would make a qualifying purchase of real gold. Then there’ll be three tiers of of NFTs you can get with it, so tier one may be a 10,000 pound purchase of bars or coins.
“You could purchase an exclusive NFT from a range of a thousand designs, all completely different. People still get the real gold in their hand, but they’re getting access to exclusive NFTs as well, that can be traded. The NFTs may also have community benefits attached to the underlying smart contracts like early access to new coin releases, or even exclusive access to some assets.”
“I think the younger community and NFT investors really like this kind of social recognition, and being part of a membership or exclusive group.”
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