It’s time to get your hands on some gold. Photo: Bloomberg
by Neil Newman
by Neil Newman

It’s time to ditch the crashing US dollar and buy groceries with gold. Here’s how

  • Investors are driving gold prices to all-time highs as they seek a safe haven from a falling dollar and the coronavirus
  • Fintech advances are already making it possible to save and spend physical gold on a card


I was having a beer the other week with an esteemed former colleague and superb commodities commentator, Tom Holland, who was saying that he kept hearing from people thinking the US dollar would “crash”, and that he thought they might be right.


Gold loses its shine in India as Covid-19 pandemic keeps sales down and shops closed

Gold loses its shine in India as Covid-19 pandemic keeps sales down and shops closed
For the past four years at least, currency analysts and commentators were saying the US dollar was too strong and would correct. The same would go for the Hong Kong dollar, with the Hong Kong Monetary Authority’s peg in place. And indeed, if you compare it with the sterling or the euro, the US dollar is strong. But, as Tom pointed out, what would it crash against? Sterling? Unlikely, with the British economy in its present state. The euro? No, for the same reason. The Japanese yen? Also unlikely, as it seems to reliably trade in a ¥105-¥110 range against the dollar – and even if it did, would anyone but the Americans care? Probably not. The more likely case would be for the dollar to generally decline against all the major currencies, and of course take the Hong Kong dollar with it. I suggested to Tom that a sharp dollar decline may already have occurred, but that it happened against gold.

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People sometimes forget that gold is not just luxury jewellery and fancy coins, but that it’s traded just like a currency. And like a currency it is freely convertible into other major currencies, meaning the US dollar can fall in value against gold just as it can against any other currency. Now that an ounce of the precious stuff has marked new highs over US$2,000 to the dollar, perhaps it has already done so to a degree.


Indian man wears US$4,000 gold face mask to protect from coronavirus

Indian man wears US$4,000 gold face mask to protect from coronavirus


Gold differs from other physical stores of value, like the diamonds in your safe or the Rolexes under your bed, in that there is price discovery for all market players. Whereas diamond prices are essentially dictated by De Beers, and the price of Rolex watches by their maker – and they go up each year.

You can also buy virtual gold (and silver) through futures, ETFs (exchange-traded funds) or derivative-laden funds, but this can be risky since you’re not always buying real gold and that actually belongs to the fund or the derivatives product issuer.

According to the world gold council, Covid-19 hit the demand for physical gold, falling sharply in H1 2020 by -17 per cent for bars and coins and -46 per cent in jewellery year-on-year.

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Offsetting this by a long way were the inflows into gold ETFs hitting records, which is what drove the gold price up +17 per cent in US dollar terms in the first half of the year. Concerned at the risk to inexperienced investors, Chinese regulators and several major banks, including Industrial and Commercial Bank of China (ICBC), introduced curbs in the mainland last Friday on those wanting to speculate in precious metals, including gold, saving them from the midweek correction in gold futures.


Vietnam boasts ‘world’s first gold-plated’ hotel

Vietnam boasts ‘world’s first gold-plated’ hotel


In times of socioeconomic or political stress, such as President Donald Trump’s election, the Brexit vote, and now the Covid-19 crisis, money finds its way to gold, as well as the Japanese yen and the Swiss franc – things in which we feel safe squirrelling away our hard-earned cash.

The yen and the franc are thought of as “safe haven” currencies, easily accessible through online multicurrency bank accounts and far safer than hiding banknotes in a jar in the freezer. Buying and selling gold, on the other hand, is a bit more tricky – the favoured method has been to buy coins and put them in a safe-deposit box, but of course that can be a bit inconvenient, especially when you want to spend them.


When we think of gold, we often associate it with luxury items. Now, Covid-19 has done a number on the luxury goods market, so it would be unreasonable to hope that strong demand for jewellery would buttress gold prices, though as we come out of the crisis and people go shopping again this may change. However, demand for the metal could remain strong as perceptions about its use shift.

Simple economics would suggest that with the massive injections of government money into the world’s economies, north of US$10 trillion, the purchasing power of fiat currencies will fall as there is a lot more money in circulation and in people’s pockets.

Printing money is easy, especially when you don’t need a physical printing press or minting machines to do it, and that’s just what governments have done. So in the post-Covid world, the purchasing power of currencies will likely decline, inviting inflation to rear its ugly head – something we can already observe in Hong Kong’s supermarkets. Have you noticed how much the price of basic goods has moved in just three months? The Hong Kong government has injected almost 5 per cent of the city’s annual GDP into the economy and put HK$10,000 into each of our pockets – CK Asset and Jardine Matheson want a bite of it.

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Now, if we were to dispense with fiat currencies and instead save and spend with real gold – central banks have not yet figured out alchemy – wouldn’t that be an idea? Yet walking into Wellcome with a Canadian Gold Maple Leaf coin, a pair of pliers and some scales is not really practical. This is where fintech comes in to make the process easier.


What is the Hong Kong Dollar Peg?

What is the Hong Kong Dollar Peg?


If gold is a form of currency, then why shouldn’t there exist something like an e-payment system you can use to pay for your daily groceries, with gold as its base currency? Turns out there is such a thing.

A few years ago I came across Glint, a Britain-based fintech company that lets you buy physical gold through an app and then spend it with Mastercard, and had the good fortune to meet its CEO, Jason Cozens, who persuaded me to give it a try.

Today, I buy a little gold nugget through Glint that is stored safely on my behalf. Then, when I’m standing at the till in Wellcome or Parkn’Weep and they want my gold fillings for a bag of groceries, I can in fact pay them directly using the gold in my Mastercard. This is very amusing, and an enjoyable payment experience, but more to the point it shows how fintech can create new and interesting investment and payment options.
Glint is a Britain-based fintech company that lets you buy physical gold through an app and then spend it with Mastercard. Photo: Neil Newman

With quickly rising global interest in investment in solid gold, and with faith in government-printed money slipping away, especially the US dollar, I would not be surprised if Glint becomes a rising star, being one of the very few options in the fintech space opening up alternative e-payment and e-investment services. It is an early one to venture into providing direct and easy access to physical gold, real-time, without having to go to a coin or bullion dealer and storing it. I personally think, watch this one! It should be of interest to investors, especially if it should get listed sometime in the future.

And if you plan to buy gold, be patient, be nimble and buy it on a down day.

Neil Newman is a thematic portfolio strategist focused on pan-Asian equity markets