The service will let investors trade Royal Mint gold 24/7 CREDIT: Leonhard Foeger/Reuters The Royal Mint is to offer a new way to invest in gold using the technology behind Bitcoin, the digital currency, launching in 2017. This marriage of arguably the world’s oldest asset with its most futuristic technology is said to offer significant benefits to private investors – if they can understand how it works. What exactly is the Royal Mint going to offer?
It is already possible to buy and sell gold online – without the trouble of taking delivery and storing the precious metal – but investors currently need to use specialist websites such as BullionVault. The Royal Mint’s new service, by contrast, is intended to allow investors to trade its gold, held in the Mint’s vaults, at any hour of the day or night via their existing investment shop. No such firms are on board yet, but a spokesman for the Mint confirmed that it had mainstream companies such as Hargreaves Lansdown in mind as partners for the new service.
The Mint is working with an American firm, CME Group, to develop and run the new service, which will also be available to fund managers and other third parties. The Royal Mint does already offer gold trading services. Its gold can be held in Sipps (self-invested pensions) as of this year, although it is not an instant process. Another Mint service, “Signature Gold”, allows investors to buy fractions of a gold bar stored in its vaults, again offering round-the-clock trading, for a 0.5pc annual management fee.
However, this is done via the Royal Mint’s website, not third-party investment shops. For large-scale trading to be possible on multiple platforms, a secure digital record of ownership is needed. This is where the new technology (called “blockchain”) comes in. Essentially, it is an online ledger of transactions, updated cryptographically, whose entries cannot be deleted or edited once added. Copies of the ledger are shared over the internet by multiple parties. For the record of ownership to be lost, all copies would need to be deleted.
Charlie Morris, a multi-asset investment manager at Newscape Capital and an expert on gold trading, said: “What this technology can do is exist in an open world. I think firms such as BullionVault and GoldMoney are great, but their system works beautifully in a closed circuit. Provided that you trust the organisation, which people do, that’s fine. “But with blockchain technology, someone can trade gold here and in Japan, with it sitting in the Royal Mint’s vaults, and you don’t both need accounts with the same provider.”
Cryptographic ownership records can be either public or private. Public systems operate on a “peer-to-peer” basis. Anyone in the world can read the ledger, submit transactions for verification, and be involved in the verification process