Gold & Silver On The Blockchain | Peter Engeman Interview (2020)
Paul Engeman is director of Ainslie Bullion & Reserve Vault which has offered Gold and Silver straight to your cold storage.
So the big question is – security! We cover this in detail and get to know how we can be sure the gold in the vault isn’t being sold twice. Great interview and a look into the future of tokenized assets.
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If you look at all the gold at that’s ever been mined, so 190,000 ton or whatever, it’s around that $7 – 8 trillion. But if you look at what’s actually I guess, available to trade and in investable form, I estimated about one and a half trillion.
The TraderCobbb Crypto show talking business in blockchain. Ladies and gentlemen, welcome to the Trader Cobb Crypto show. With our guest today we’re talking about gold silver bullion as well as OTC on Bitcoin and various other bits and pieces.
It’s Paul Engeman, who is the director of Ainslie Gold and Reserve Vault. Appreciate your time today mate, thanks for being with us.
And I’m very glad to be here. Look, I’m pretty interested in this because well obviously I’ve traded commodities for a lot of my trading career they one of my favorite things to trade because I do have a lot high, look oh sorry, a lot of high volatility around certain events.
It can be somewhat predictable in their trends. So you want to just tell us first of all a little bit about your background. And have you been in gold and bullion and precious metals your whole career or has it been just recently?
Oh Yeah, so I’m actually I’m a civil engineer by training. But 20 years of my career has been in property development in publicly listed companies in the like, around, sorry, but I started started getting into precious metals just before the GFC.
So somewhat luckily identified that that was probably going to end badly before it did and went put everything into into gold and silver, which worked out quite nicely. And then in 2013, I made the move from property into into Ainslie Bullion.
So I’ve been here for about six years, six and a half years. And, yeah, enjoying the change. So I mean, that’s a pretty big call mate. You know, I traded through period when I was in London and for a trader it was just you know it was wonderful.
Yeah. You know if you’re trading derivatives It was fantastic which I was so. I mean what what sort of things was it that made you really get that bullish gold and silver.
Of course it went on was one of its biggest runs ever. Yeah. Throughout that period. What what was it that you’re looking out for? And again, are you saying anything now?
Yeah, look it am pretty similar, like I think in that laid up, yeah. So gold gold and silver started that, that, that bull run in some 2004. So and I guess the the reasons behind that were exactly the reasons why I was getting nervous about, about the financial system.
So and really, none of that’s changed. We’ve we’ve gone through the GFC, which was essentially a debt born credit cycle crisis. And what they’ve done is just as you know, just trying a whole lot more depth and stimulus added.
So you know, I often talk about you know that the GMC was triggered by about one and a half trillion dollars of subprime debt. But we’ve added about 104 trillion since then. 75% up to, you know, to the mid 200.
So, so that all this market that we’re seeing now is is the central bank inflated and not fundamentals. So I then go look at fundamentals and the fundamentals are things like gold and silver and other hard assets.
Yep. Make sense. I mean, look that’s what I don’t understand is, you know, I’ve exited a lot of my equity positions of 18 months ago because I don’t care to catch the bottom or the top I want to chunk in the middle.
That’s my whole being as a trader and investor right? Take the safer money if there is such a thing. Now, you know, through gold and gold’s had a pretty decent little run earlier. Well throughout 2019.
I mean, it’s, it’s it’s had a pretty damn good run. I’m speaking to a market that’s what $1.4 trillion or no 11, $11 trillion or $14 trillion. What’s the gold market now it’s hard to tell I know. Yeah it will.
It’s an interesting story. Because if you look at all the gold that’s ever been mined so 190,000 ton or whatever, it’s around that $7, $8 trillion. But if you look at what’s actually, I guess, available to trade in an investable form, I estimated about one and a half trillion.
So you know, and then that’s the a lure, right? So if you’ve got $300 trillion in financial markets and $200 trillion and private, private property and all that panics and tries to get into that little one and a half trillion dollar space.
You know, in that supply demand price equation, there’s there’s only one variable there so so that’s the lure I guess that safe heaven ……
It feels very similar to that of what people hope will happen with Bitcoin, I suppose. And, I mean, in a financial sense, if you consider how small Bitcoin in the crypto asset space is, it’s, I mean, it is very, very similar to that of what like what Bitcoin is to gold is what gold is to other financial assets.
So I think you know, gold, probably going to be the one that produces more goods out of that simply because it’s a tried and tested safe heaven if you will. And there’s a lot of people arguing for towards that a lot more people have assets oh sorry have opportunities to trade with that.
Which brings me through now to what you’re doing with the tokenization because what you’re actually doing there is using blockchain to essentially use a blockchain for gold and silver on. Is that right?
Yeah, yeah, absolutely. So and I guess look that the backstory is in 2017, we actually added the top five cryptos to our offer. So Over The Counter we’re pretty well a first in Australia are the only ones doing it. person to person high value, walk away with a secure wallet.
So the natural progression of merging those two worlds was that you know, the 5000 year old monetary asset with this new fandangled blockchain thing. But it works so beautifully, seamlessly because you know, it just addresses some of the clunkiness of owning physical metal.
So, and the other thing when we looked around at what else was out there, you very scratched the surface and you very quickly find yourself in Malta or in the Caribbean or so these sort of red light jurisdictions.
Yeah. So, so the opportunity was there to have something domiciled in Australia. Signed off by you know, pretty well the preeminent lawyers in this space in Australia by a 45 year old bullion dealer, not a startup.
And and tokenised gold and have it 100% backed and my absolute preoccupation with all of this is to I guess address any concern because we hear all you know the stories of rehypothecation and and ETFs not having enough air and all this sort of thing that you have absolute visibility and third party assurances that every token on issue.
So every tokens one gram of gold, one gram of silver, that you know, most definitely that that sitting in reserve vault. BDO audited that every quarter and that audit it’s not just about is that there now it’s that has not moved.
So we haven’t gone and played with that in between audits. So that’s completely addressed. And it’s fully insured by Lloyds. So, so that was you know, there was a preoccupation is to get something that was as allocated as you can get in a tokenized form.
But then give you all the benefits of the blockchain of transferability and security and and I guess that that’s the, the, the economics of it as well in terms of, you know, low margins.
And now how do we get around? Like, I mean, one of the things I think that the listeners and viewers will want to know is this. I mean, obviously, I believe that the way that you know, the what’s it called?
Your centralized banking system first operated was by the gold miners coming in and having a gold back there and then they get these notes suggested they have this much gold and some bright sparkle went, hey, hang on?
Only 10% of people taking the gold out of here. Let’s inflate. Now what it is that was where gold backed currency came from really.
So how do we know that that the gold that’s in reserve vault isn’t somewhat owned by somebody else and we’re playing the same game and putting it across both the physical that, you know, I probably showed I can buy a kilo of gold have it sit in reserve vault safely securely with my certificate under my name.
And then you’re selling half of that block of gold or that, you know, gold bullion bar into the tokenized economy. How do we have the reassurance that that’s not happening?
Yeah, that’s a good question. And it also speaks to the obvious question of what eventually goes broke. Okay, so, so what? So what we’ve done again, there is create a completely clean skin company called Gold Silver Standard Custodian.
That companies only assets are the metal that it holds, and it’s only liabilities are the tokens on offer that have the right to that metal. So there’s just no way of on selling that metal to anyone else.
The metal doesn’t move. It stay there. Every single serial number of every single bar is recorded on the blockchain. So whenever we mint more tokens, the transaction hash is applied to that serial number.
So you have absolute visibility by the website, you can interrogate the database that has the record of all this. The blockchain which is you know, immutably always there and transparent and you can always see the two to meet.
So, whatever happens with Ainslie doesn’t really matter. Because that that is held completely separately. Okay. Well, that’s that’s good to know. I guess the second side of that is, um, you know, you can mint more tokens as you get more gold, right and depending on demand.
Yeah and the opportunity there too as opposed to other examples is, so in terms of marketcap, so the marketcap at the moment’s, about about five and a half million dollars of the tokens.
But so if you wanted to buy $5 million or sorry $6 million worth then or any higher, you would normally move the market, but we can facilitate easily through Ainslie Wealth is that you say I want $5 million worth, we actually don’t buy $5 million in metal.
We mint that $5 million in metal and we issue you the tokens. We haven’t moved the market at all, you’ve done it all at the same spot price and therfore so you just have effectively infinite depth of buying without know, moving the market or paying extra.
And, and where do I store this? Is there a specialized wallet? Is it built on Etherreum network? Is on my trees and leaves? Where, where will I put it?
Yep. They’re stored on ERC20 token so it’s any any wallet that’s compliant with ERC20 which is most. So I guess the other thing that we introduced when Ainslie Gold was doing the OTC is that we will supply anyone who comes into store because we need you to watch us do it.
For obvious reasons as we produce a cold wallet in front of you. So that’s, that’s essentially a paper wallet, nicely packaged, but it’s something that’s produced completely offline on machines that never been online and will be and you walk out.
And also helps with, I guess, newcomers to crypto is that, you know, where is this thing of what do I get when you’re walking out with a wallet that is unhackable because there’s just no connection to the internet ever, then you know that that’s one means of doing it.
But you know, we’ve got storage accounts where we have cold storage in reserve vault that we store it for you. Or you might have your own Ledger, Trezor or Uconnect, whatever it might be.
What if I lose my Trezor? What if I lose it? Is it is it somewhere where it’s stored? Where there’s a claimable? You know, I’ve got 50 grams of gold, I’ve lost my Trezor. Is there any link back at all?
Or is that the responsibility of the whole lies? Absolutely. So just like any other cryptocurrency, you lose that private key and and it’s gone. Okay, well, that’s, that’s for as much safety for the client. Really? More than that? Absolutely. Absolutely. Yep. Okay, cool.
So has anybody actually settled? I mean, we know the market five and a half million right now is anyone actually going to heaven settled in the physical because it’s 50 kilo gold up to 50 kilos. And so I kilo of gold and 50 kilo of silver. Does anyone settled?
Ah no, they haven’t. So it’s am look at the beauty of that ridhima middlee means that that introduces real arbitrage. Okay, so if this thing becomes its own organic market, then the mere fact that you can redeem, as you say, just come in with no cost at all.
Give us 1000 US and we’ll give you one kilo of gold. That that straightaway introduces the arbitrage into and that’s what we wanted to in terms of the stable coin in terms of something that really tracks the price of gold or silver.
But to date, no one’s actually redeemed. But am mind you, you know, the price is not doing things that would ordinarily have people doing that anyway.
No, well, I mean, we’ve seen gold sort of level out for the last few weeks haven’t we? We’re struggling at 1500 at the minute what’s what’s your thoughts for the rest of the of for 2020 on the asset class itself?
I know it’s difficult to really have an understanding again depends a lot on what happens across financial markets but certainly a good start to the fantastic 2019 for gold at least.
Yeah. And so we saw gold what get up about 20% or something this year at one stage. So it’s come back a bit. So it’s up still up about 17% to the year. Silver, you know does what silver does. It lagged and then it overshot and then it’s come back further.
So that gold silver ratio is still very closely watched by a lot of people and still exciting prospect. But, but look in terms of where to from here. Yeah, look, we’re we’re very much about balance.
So when we don’t try to predict, because with all due respect, no one knows. Correct. And so, but it’s really about, you know, now our trademark is balanced your wealth in an unbalanced world.
And that the world’s pretty pretty bloody unbalanced at the moment, you know, with with a lot of very strong capital, the stimulus, the debt burden, the geopolitical tensions and that sort of thing.
So I just think we have a very strung out world that at any point, one of the one of the pieces in that very interconnected and very, you know, intricate model is going to break, and we won’t get warning.
And so they are saying, you know better be too earlier than a day to late. I think is sort of the rule of thumb for owning gold and silver. It’s the insurance when this does and will go wrong. We just don’t know when.
Yeah, it’s been very interesting watching, hasn’t it? I mean, we saw HSBC cut 11,000 jobs or announced they’re going to cut 11,000 jobs. I thought maybe that might be the straw.
I mean, they’d say one thing, but you know, they they got a lot more information than us that politically driven and so not political driven, a market driven forces from a bank like that to be significant.
So if they want to say we’re cutting 11,000 jobs, because we think that there’s a big storm on the horizon that wouldn’t do their share price any good at all. It would not do global markets any good at all, but isn’t looking to cut that Deutsche Bank’s in a lot of trouble.
They potentially could disappear. Which would be would be bigger than Lehman Brothers I would suggest if that was to occur. We’ve got lots of little banks around the world that are if they were to go through a stress test right now I think they would be under an awful lot of pressure so it’s a melting pot right now it’s bubbling away.
And am you know, we saw that at the start of the year through gold having that as you say that at one stage 20% run to the upside silver overshooting as, as a little brother often does. And, and a bit more steadiness of light.
When we look at the the tokenized side of gold, are you seeing a different type of market participant? One of the things that I think tokenizing gold, and any other asset class that may not be as easily accessible to to moms and dads other than buying a gold mining stock or an ETF is.
It allows you participants to come into the space you’re saying that the volumes of these possibly more retail side clients, the individual. Your size being lowered or is that a big mix? Where we see, it’s just as lovely to watch it.
And then because it facilitates by it, so we’re we’re on list on CoinSpot. So in the first couple of months on CoinSpot, we did 5000 trades worth about $2.1-2.2 million. So if you look at the average of that, that’s only $400.
And that’s the average. Okay? And when I look at the transaction transaction list that anyone can look at, you can you can see that there’s some micro trades. You could buy, you can theoretically just by point seven cents of gold, you know.
So it’s just four decimal places and one tokens one gram. So, so we are seeing, we’ve got an but what importantly is they’re buying it at the sorts of spreads that are easily I mean, for the people that are buying sort of, you know, 10 ounces a kilo of gold or 100 ounces of silver so that they’re getting little amounts at the big guys spread.
And then on the flip side, we’re seeing some large money coming in, particularly in silver because of the storage aspects of high value of silver. They can buy silver tokens and literally weighs nothing and storage is free.
So we’re seeing both ends of the spectrum but I think it definitely does introduce a easy way for you know the guys that are beginning their investments. Exactly and look it can also be sort of saying is somewhat of the stablecoins as well. I mean let’s not let’s not beat around the bush on this.
I mean we’ve got the thing is is that your your asset class that is gold and silver that is sitting on the blockchain that is there verified that is backed by Lloyd so it is insured, it’s very structured and and you know, you’ve got everything you need to back up.
Then you look at something like USD Tether which seems to have a lawsuit coming out every second day of the week. True USD seems to be a little more clean and clean.
But am I see this potentially another another, you know, opportunity for people that if they want to move out of Bitcoin for it because the market bearish on the asset class sometime if they especially don’t know how to trade it and hedge themselves that it could be wise move to move into.
A bit of gold and silver here and there just to balance that portfolio into I mean gold gold does move up and down don’t get me wrong quite as much as obviously moving into some alts. And we’ve observed that on CoinSpot so we’re definitely saying you know, if there’s if there’s a strong run we’re seeing a spike in in some looks to be profit taking out or you know Bitcoin and into into this and vice versa.
So there’s been selling down on the gold when bitcoins looking low and a good buy so so we’re we’re observing that through CoinSpot as well. And and you know the beauty of this is you can trade it 24/7, which is very hard for gold and silver and and again oppose.
So there are spreads just because it is physically backed by something that has real physical spreads in terms of how it all works. But you know, that that cost is the fact that you’ve got something essentially allocated as opposed to a CFD or other sort of non really backed derivative out there in terms of playing, playing that gold and silver market.
So you get that sort of hard asset, like a counterparty risk play, versus something that’s completely completely synthetic. Yeah, what’s some what’s the minimum and maximum is there a maximum side of trades you’ve got on your OTC for the Bitcoin gold or silver or whatever you host there?
No, no maximum becasue as I described before, we can we can order as long as any to the to the upfront, you would probably have to wait a week or two for the metal to arrive. But the fact is, you have a contract, you lock your prices locked in, you’re just waiting for us to get the metal and mint the token.
So so there’s essentially no upside and limits in terms of what that is. And likewise, there’s there’s no minimum. So if you buy OTC through Ainslie we’ve got a $500 minimum just because of that human effort in store but am but you know over CoinSpot, you could literally by a cent if you wanted to.
And it said, I mean, it’s pretty obvious too isn’t it? I mean if you are gonna get on CoinSpot you look at that you look at the order book and you go, there is not enough there for me to buy.
Pick up your phone and give you guys a call and just said, look, I needed this amount. It’s not in the order book. I don’t want to bring the price right up. What should I do here? Yeah, yeah. And then you guys can facilitate the meeting and grabbing a hold of the you know you’re the secondary market. Really?
Yeah. And that that human to human aspect is is important for a lot of people as well, just to you know if they they knew the space particularly.
Absolutely. Well, Paul, it’s been an absolute pleasure getting to understand more about the project. Is there anything that I’ve missed that you want to sort of talk about at the moment or? No, I think we’ve we’ve covered pretty well mate.
Taht’s am, yeah look at some on any way we’ve touched on this, but on any overview of the world at the moment, it’s some, it’s pretty important to get some some of that sort of safe, safe asset or the uncorrelated asset into your portfolio and that’s the key thing we talking about it.
It’s just having an asset in your portfolio that’s not correlated to the rest effectively, and gold and silver have proven that time and time again. Bitcoin’s proving it to some extent already as well. But it’s, it’s really about giving that true diversification in your portfolio.
And, and you know, and now you’ve got an easy way of trading in and out of gold and silver as well. 24/7. Could have been a truer word spoken for. Thank you very much for your time where people find out more information about yourself and the project.
Yeah, sure. So golden silver standard is literally goldsilverstandard.com. Or if you want to counter Ainslie Bullion, it’s ainsliebullion.com.au.
Thank you very much, ladies gentlemen, Paul Engeman, Director of Ainslie Bullion and Reserve Vault. It has been an absolute pleasure speaking with you, thank you so much for your time today.
Good on ya mate. Thank you. Cheers, guys. Bye for now.
The TraderCobb crypto show talking business in blockchain.
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