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HSBC Launches Digital Token
One of the largest banks in the world with more assets ($3T) than any European bank has announced it is launching Evolve, a distributed ledger technology trading platform for trading digital versions of precious metals held in its London vaults. HSBC is one of the 'big four' in the London gold market and processes some $30B in transactions every day.
There have been others in the recent past who've tokenized their gold, including Kitco Gold and Paxos (Pax Gold). HSBC's foray into the digital gold realm is by far the biggest and most significant to date and are issuing a digital token with the equivalent of 0.001 ounces, making it more accessible for retail investors, compared to the standard 400 troy ounce London gold bar. Every one thousand tokens issued is equal to one troy ounce in their vaults, making gold more 'trade-able' than ever.
While the market for digital gold is still 'small' at about $1.1B, this new development is likely a game changer. I can see these tokens being gobbled up by institutional investors. Gold's value has exploded in the last month, hitting a high of $2,004. At time of writing, it sits at $1,985 as it digests Wednesday's FED decision to hold rates steady at 5.25 / 5.5%.
I'm not certain how much gold HSBC has in their vaults but collectively, London has 698,000 gold bars, each weighing 400 troy ounces. Its present estimated value is just over half a trillion dollars. Even if they have just 100,000 bars (one-seventh), it would still amount to 40 million ounces and that in turn would amount to 40 billion tokens that may be issued. This would allow for the many to have access instead of just the tiny few.
It's not a bad idea at all. No physical gold would move around but their digital versions can otherwise move around freely. It seems plausible to me that some time in the future, someone you want to do business with might demand payment in 'digital gold', instead of some dying fiat currency.
Tokenizing gold might give those who missed out on Bitcoin's extraordinary rise a chance to get in on the action, many of whom were doubters of Bitcoin initially. As debts mount world wide and their respective currencies hitting fresh lows against gold which seems to happen now on a regular basis, it would make sense that those with very little will turn to such a token as insurance simply because it has gold attached to it. Gold's 5,000 year history is entrenched in the human psyche. Its rise from year 2,000 until today is a sight to see, from a graphical standpoint.
The lows in the mid 2010s is a result of the massive money printing that pushed gold lower and the stock market higher. Fast forward to today and the world's sovereign debts are bringing about a reckoning as interest payments on those debts soar after central banks have gone on one of the most, and some say THE most aggressive rate hike policies ever in the last year and a half or so. While the FED didn't raise rates yesterday after their latest FOMC meeting, they have not ruled out another rate hike next month or in January. I expect gold to perform well over the next little bit as nervousness builds.
Also, War is very costly and what's going on in the Middle East is frankly, making matters much worse. While to top it off with icing, another debt ceiling fiasco is soon upon us again in Washington. I can almost guarantee you they'll raise the debt limit and print more money, increasing the total debt and its associated interest payments. Another half percent rate hike would be brutal.
HSBC's new gold token will likely be a hit. I'll be keeping a close eye on this one.
In closing, here's something cool / interesting... The Italian footbal (soccer) club AC Milan have created a digital replica of their playing field in the form of NFTs with each NFT a one square yard digital version. The beauty is if something happens during the game on that very spot, the owner of the NFT can earn points. Points could then be exchanged for free tickets, autographs and such. You know, I like that idea a lot. It's one hell of a cool way to build up a loyal fan base, don't you think?
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