Goldex, a multi-dealer marketplace fintech for allocated physical gold, has launched a unique trading platform to serve fintechs and organisations looking to invest in, store and sell physical gold.
Described as a ‘plug and play’ integrated solution that enables fintechs and financial services companies to ‘piggyback’ off Goldex’s technology, the platform facilitates gold transactions as well as acting as a global price discovery tool.
Goldex, which launched in 2018 as a mobile app, has attracted the attention of traditional investors and thousands of digital-savvy consumers previously shut out from buying and selling gold at the best prices.
The technology was built to grant access while simultaneously improving consumer trust in the gold quality and dealer reputability. The new solution is a platform for the much larger business-to-business market.
Goldex say their technology enables companies to launch and deploy the new product in a matter of weeks, making it the most cost-effective solution to date in terms of commodity gold trading.
Currently, Goldex connects buyers and sellers to global traders through its Goldex app, providing details of the best prices available.
Fintechs in competition for new products
According to reports, the move comes in response to fierce competition within the fintech industry. Fintech start-ups must expand into new verticals, products, and solutions in order to attract and retain customers.
Goldex acts as a behind-the-scenes fully integrated, white-label solution that allows investors to maintain branding and customer experience while presenting a new offering.
Demand for gold trading among fintechs
Data from the World Gold Council (WGC) shows that the market demand for physical gold rose by 40% in 2020.
Basel III regulatory laws ( a set of global financial reforms that aims to ensure banks have sufficient capital and liquidity, but less leverage, in order to withstand economic shocks) also come into effect on June 28.
Market experts believe the new regulations will boost appetites for the precious commodity because new rules have significant implications for banks, bullion dealers, and other financial institutions that trade in unallocated gold.
Balance sheet gold vs physical gold
Often referred to as “balance-sheet gold”, unallocated gold offers exposure to gold prices but does not provide legal ownership of the metal to the buyer. Until now, banks did not have any capital requirements but, under Basel III, they will be required to put up to 85% of the value of their unallocated gold positions in cash or equivalent. The jump is significant as previously the requirement was 0%.
The move by Basel III is expected to cause reverberations across the gold industry. Predictions suggest that unallocated gold will be exponentially more expensive as banks will need to finance 85% of their trading positions.
The new regulations may also force banks and other businesses to shut down their operations as they will no longer be economical to run. The unallocated market might also suffer liquidity issues as costs increase and supplies drop.
Some experts believe these issues could have a detrimental effect on the allocated physical gold market. If the focus of gold trading changes towards allocated physical gold, it may result in increased demand that puts pressure on liquidity and result in gold prices spiraling upwards.
Gold investment opportunities through fintechs
Reports show that physical gold is in demand because its finite supply cannot be printed at will, resulting in devaluation. This factor has boosted the popularity of innovative allocated gold trading solutions that provide easy access to multi-liquidity venues and best-price discovery tools.
Speaking about the new platform launch, Sylvia Carrasco, CEO of Goldex explained, “We know the changes and pressures that fintech companies face in diversifying into new products. Let’s not forget that we are a fintech start-up too.
“Of course, Basel III has been in the cards for a very long time and it has not come as a surprise. Over the last 18 months we have designed and developed the ultimate solution for B2B and B2B2C companies to be able to compete within their industry and at a time when the gold landscape is changing.”
Carrasco added. “Being the first to market is always a competitive advantage and we are excited to be in this privileged position.”
Four reasons to invest in gold
- Demand for allocated gold has risen 40% in 2020, even though demand for gold jewelry dropped 29% in Q3 of 2020. The World Gold Council (WGC) says the figures show that when tough financial times occur, it's a commodity that always rises in value.
- There is a finite supply. Unlike a currency, there is and always will be a limited supply of gold. It cannot be generated - and therefore devalued. If all the gold on earth were collected together in one place, it would fill an estimated 3.7 Olympic swimming pools.
- It's a stable investment. Although political, or natural disasters can make it appear volatile in the short term, metals are historically one of the most stable investment commodity markets.
- The use of gold in industry is limited (an estimated 10% of the global supply is required for manufacturing, dentistry, and the electronics industry). Therefore, it is insulated from manufacturing recessions.
Image credit: Goldex