Once upon a time the gold price was an effective gauge for monitoring the health of the economy and the stability of the world. When economic or geopolitical tensions rose so did interest in gold and vice versa. Complex derivative market schemes valued at over 15 times Global GDP have created a fragile house of cards dependent heavily on maintaining status quo, or at least the illusion of status quo. If big players leave the table the dominos start to fall; therefore safe haven assets like gold must be tightly controlled. The New York Comex gold futures market and the London Bullion Market Association (LBMA) are the containment mechanisms of choice. Paul Craig Roberts and Dave Kranzler covered the topic extensively in The Hows and Whys of Gold Manipulation.
The rise of Bitcoin and blockchain technology has given birth to a new breed of safe haven assets and the money is quite literally rushing in. Among this new breed is DigixDAO(DGD), a gold exchange built on the Ethereum network.
DGD stores physical gold in a Shanghai vault. 1 gram of gold equals 1 DGX token. These tokens are not available for purchase at this time. Once the DGX tokens are available for trade DGD will collect a 0.13% transaction fee for exchanges made on the network. DGX tokens are essentially contracts for physical gold and holders will be able to redeem them and take delivery at anytime. DGD tokens represent a stake in the exchange and will yield a quarterly dividend paid in Ether based on profits generated from transaction fees. If I understand this correctly, speculators can essentially own a stake in a transparent blockchain version of the COMEX gold market.
DGD’s market cap has grown from about $50 million to almost $200 million in the past month and is currently trading at around $70. If the exchange is successful we could see a wave of Ethereum based commodity markets emerge. This trend is likely to continue based on the list of heavy hitters attending Consensus 2017, Coindesk’s blockchain technology summit, next week (May 22-24) in New York City. Ethereum is tipped to be the star of the show as powerful pieces appear to be positioning themselves on the board.