Gold and Silver News
From Guardian Vaults
A new way to buy gold
Throughout history, gold has been traded for goods and services via various exchanges. For a long time, hard currencies were pegged against gold to maintain their value. In the early 1970s, the Nixon administration unpegged gold and let the $US float in an open market. This also allowed gold to be traded more openly in the free market which has seen the metal range in price significantly over the past 40 years.
But technology is changing the way banks and financial institutions operate, and a new technology is about to offer a new way to trade gold. The typical way of purchasing gold bullion – bars or coins – has been through exchanges such as the Perth Mint in Australia and similar others around the world. Additional ways to access the movement in the price of gold has been to purchase shares in gold mining companies such as Newcrest Mining (NCM. ASX).
There are certain disadvantages arising from this as companies make decisions that can impede their growth even when the price of gold is rising, such as the way they structure their costs and hedge facilities. This can limit their growth potential if their assessments are incorrect ensuring investors do not benefit from rising prices.
Another path is through Gold traded ETF’s that aim to track the price of gold. These allow investors to invest in a secondary way without owning the underlining asset which factors in a larger risk than purchasing the metal out right. ETF”s such as Xetra Gold based in Europe last month had its biggest inflow of funds since its inception of just under $1billion due to increased anxiety over geopolitical events throughout Europe and the U.S. The annual expenses of these funds such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each share, so the amount of gold in each share will gradually decline over time.
Now, new technology and trading platforms are being introduced to allow gold to be purchased by investors. One such way is the new London Bullion Market Association’s trading platform created by Autilla Inc. It has been created to ensure the city’s over-the-counter (OTC) market is more modern and transparent.
The platform is being introduced as increased scrutiny from regulators is pushing for tighter commodity-trading controls in the $5 trillion of gold exchanged annually. The platform is also being commissioned at a time when competition is increasing in the gold market. Banks such as JP Morgan Chase and HSBC will start testing the new bullion-trading platform in the coming weeks and could be up and running by late March.
As well as beginning a transformative way to ensure market competition in an ever expanding and growing market place, this new platform will introduce a new dynamic into gold trading that will allow greater diversity for investors looking to purchase gold.
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