Using digital tokens to save up for bullion purchases

[goldsilverdash]

As stackers, what we want is to hold our precious metals in our own personal possession. "If you don't hold it, you don't own it". As such, we are generally sceptical towards ways to be exposed to the gold or silver price that involve a counterparty holding the actual metals, and us having only some representation of it. Digital tokens backed by real gold or silver is an example of that. However, even if such tokens are not a replacement, they might be useful as a mechanism for saving up to buy gold or silver bullion.

For example, I would guess that many stackers either make smaller bullion purchases often or save up in fiat currency for a larger purchase. Neither option is ideal. If you buy smaller quantities more often, you are cost averaging, but you will pay a lot for shipping. But if you save up in fiat for a larger purchase you will save on shipping costs and may be able to take advantage of bulk pricing, but those funds will not be exposed to the moving gold or silver price during the time you are saving up. Your desired bullion product might get further and further away from you due to a rising spot price (or devaluation of your fiat metals fund).

Enter digital tokens backed by real metals. With these you can do a more fine-grained cost averaging by buying say one gram of “digital gold” per month or one ounce of silver per week or whatever, with the goal of exchanging that for bullion at some later point, say once per year or whatever. This scheme also lets you ignore the spot price at the time of the actual bullion purchase (because you have already bought in) and lets you focus more on finding good deals in terms of lower premiums or cheaper shipping.

Is this something that more people do, or have I stumbled upon something new? I haven’t seen it discussed anywhere.

Edited March 17, 2022 by goldsilverdash

[Bigmarc]

I have been buying digital silver for a while now with the view of selling for gold if the gold silver ratio does its once in a blue moon spike. It's backed buy physical and there is no vat but you are right in the fact I don't own it. I've looked into a few other options but the cost involved never really beat buying actual gold. There are also many companies out there doing this so there needs to be a level of trust which can be difficult with the horror stories out there. But who knows what the future will bring, I read the other day that mining companies have started selling crypto backed by what the produce. 

[goldsilverdash]

12 minutes ago, Bigmarc said:

I have been buying digital silver for a while now with the view of selling for gold if the gold silver ratio does its once in a blue moon spike. It's backed buy physical and there is no vat but you are right in the fact I don't own it. I've looked into a few other options but the cost involved never really beat buying actual gold. There are also many companies out there doing this so there needs to be a level of trust which can be difficult with the horror stories out there. But who knows what the future will bring, I read the other day that mining companies have started selling crypto backed by what the produce. 

Being able to play the ratio is another benefit indeed. I would also consider selling some "digital silver" for gold if conditions would become favourable for that. Maybe if it goes to 50:1

[goldsilverdash]

I'm using the Kinesis Money platform by the way, and their gold and silver backed tokens, KAU and KAG. I tried some others in the past but fees are too high to make it worthwhile.

Edited March 17, 2022 by goldsilverdash

[Bigmarc]

46 minutes ago, goldsilverdash said:

I'm using the Kinesis Money platform by the way, and their gold and silver backed tokens, KAU and KAG. I tried some others in the past but fees are too high to make it worthwhile.

I looked it to this but got put off as at the time I could only use USD, and think they mentioned 2 different block chains, one being erc20 (fees are to much). There are plenty out the you can buy on multiple exchanges and use with any wallet. Kenisis is allocated tho (I think). A few on here use them and like them, there was one company working with the Perth mint that I liked the look of but still risky. 

[goldsilverdash]

9 hours ago, Bigmarc said:

I looked it to this but got put off as at the time I could only use USD, and think they mentioned 2 different block chains, one being erc20 (fees are to much). There are plenty out the you can buy on multiple exchanges and use with any wallet. Kenisis is allocated tho (I think). A few on here use them and like them, there was one company working with the Perth mint that I liked the look of but still risky. 

Kinesis supports more currencies and assets now, including pounds and euros I think. Though, I think that if you want to deposit and withdraw fiat currencies you will have to go through the whole KYC process. But if you deposit and withdraw only cryptocurrency, you don’t need verify your identity. All you need is a name, an email, and a password. This is fantastic for me as greatly value my privacy and despise KYC.

I deposit Dash on Kinesis, exchange this for their native gold and silver tokens, and then when the times comes to withdraw, I sell these tokens back for Dash and send to my own wallet. I can then pay with Dash when I place an order from a bullion dealer that takes it (like CelticGold, for example).

The trading fees on Kinesis are not bad in my experience, and Dash transactions are less than a cent. There are some risks involved of course, which is why I wouldn’t keep a lot of funds on the platform at any one time. I simply use it to save up for my next bullion purchase.

An alternative is PAXG, a gold backed token on Ethereum. I still have a little bit of that as well, but like you say the fees are horrible. An advantage though is that PAXG is traded on multiple exchanges, while the Kinesis tokens are only traded on Kinesis as far as I know.

 

[RustyShackleford]

I was thinking Kinesis looked ideal for this purpose but the virtual visa seems to have a limit of $500, so useless for buying gold, and the withdrawal fee to GBP is £25 - ouch.  So other than bouncing funds around via crypto, no thank you, I can't see it working efficiently for me.

[goldsilverdash]

It seems that Kinesis is going to implement KYC procedures for all users, even those who only deposit and withdraw cryptocurrencies. I'm out of there! I feel even more sceptical about exchange platforms now, is there anything else out there that would allow me to very buy small amounts of silver and gold in the form of a digital token?