November 22, 2018

Sprott Inc (TSE:SII) Launches OneGold, the Secure Digital Gold Trading Platform

Midas Letter
Midas Letter
Sprott Inc (TSE:SII) Launches OneGold, the Secure Digital Gold Trading Platform

Sprott Inc (TSE:SII) (OTCMKTS:SPOXF) (FRA:A78) CEO Peter Grosskopf explains the advantages the company’s recently launched OneGold platform offers precious metals investors. OneGold allows investors to securely buy, sell, and trade digital gold and other precious metals such as silver. Digital gold is on the Blockchain and is backed by physical gold, a marked difference from other cryptocurrencies, which have seen their values plummet in recent months. OneGold Investors receive a digital certificate of the stored physical gold that is underlined by Blockchain and can be issued in any denomination. Individuals can buy or sell gold on the OneGold website faster than through a commercial bank or ETF. Grosskopf envisions OneGold developing a wallet system that allows investors to use gold to pay for goods and services, giving gold investing a new practicality.

Midas Letter
Midas Letter
Sprott Inc (TSE:SII) Launches OneGold, the Secure Digital Gold Trading Platform

[stock_chart symbol=”SII:TSX”]


James West:   Welcome back. My guest this segment is Peter Grosskopf; he’s the CEO of Sprott Inc., trading on the TSX under symbol SII. Peter, welcome.

Peter Grosskopf:   Yeah, thanks for having me.

James West:   Peter, we could talk forever about Sprott and all of its various peregrinations, but today I want to talk to you about the One Gold product that I recently received an email about. What is One Gold?

Peter Grosskopf:   Great. Well, it’s brand new. It’s basically the customer organization that we’ve set up to be able to buy and sell and trade and hold digital gold.

James West:   And how would you describe digital gold?

Peter Grosskopf:   So for us, digital gold is on the Blockchain, and it’s using all of the technology that had the cryptocurrencies become the focus of investor attention: they’re fast, they’re accurate, and in this case, it has physical gold as its backing. So it’s a technology that represents a certificate of the gold in storage; in this case, our first product is at the Royal Canadian Mint.

James West:   Okay. So does it come with an associated cryptocoin?

Peter Grosskopf:   It’s not a coin; it’s a certificate, but the certificate has the Blockchain underlying it.

James West:   And so is there a basic unit value of gold per –

Peter Grosskopf:   Yeah, we can denominate it in any unit for an investor.

James West:   Right. Okay, interesting. And so it’s backed by physical gold –

Peter Grosskopf:   It is. Which is our favourite.

James West:   Yeah, right! Well, coming from a Sprott organization, that’s very comforting. Okay, so now what would be the practical application for One Gold as either an investor, or is it to be used by individuals as a unit of payment?

Peter Grosskopf:   It will eventually. So we’re starting just with the website, which allows you as an individual investor to make a buy or sell of gold faster, quicker, and cheaper than you’ve ever been able to do it before through a commercial bank or an ETF. And so that’s the essence of it to start with; it’s just very efficient, and you can hold your gold on account with One Gold.

And then eventually we’ll get into having a wallet and being able to use that wallet for payment for goods and services.

James West:   Sure. So one of the downsides about investing in bullion for me has always been that, in a flat or negative gold price environment, it actually costs you money to hold onto gold, which actually undermines the upside of the future gold price to some degree, based on whatever your value parameters are. So then, does this One Gold certificate then not have any management fees on an annualized basis for holding or representing a unit of gold?

Peter Grosskopf:   So the underlying certificate is the first one that we’re featuring is called VaultChain. It’s offered by a technology company called TradeWinds, and that’s the first coin, if you want to call it that, that’ll be on the system.

And that does not have an annual management fee; One Gold itself will charge a small fee based on the value of your account. I can’t even quote what that is right now, but it’s inside of any other kind of similar organization.

James West:   Sure. So then, one what is the value proposition for an investor to invest in this relative to bullion

Peter Grosskopf:   Okay, it is going to be easier for you to buy the gold, and it is going to be available to you at a much lower spread than what you could get buying the bullion through other ventures.

James West:   Okay. And so I’m going to participate in the upside of the price of gold over time, as long as I hold the certificate?

Peter Grosskopf:   Yeah. It’s basically getting gold one step closer to being usable as a cash equivalent.

James West:   Okay, and so is the plan, or the vision, rather, to make this thing something that I could take a card or load a app onto my phone and use my account to pay for items at my point of sale?

Peter Grosskopf:   Absolutely. App, wallet, and eventually payment.

James West:   Interesting. So in opposition to cash, which has a more or less stable value over time, you’re using your equity in this investment while maintaining exposure to the upside in gold should there be a raise in the price of gold over time.

Peter Grosskopf:   Absolutely. You’re just, you’re basically – it’s addressing a criticism, which was at least partially accurate, that what are going to you do? Take your gold to a gas station and buy it that way? Well yes, now you can. Gold needed to come into the modern age and be useable within and without, inside and outside the financial system, as a method of payment and as a cash equivalent holding, and this is getting it one step closer to being that.

James West:   Would this be considered a competitor to Gold Money?

Peter Grosskopf:   Yes, it could be, absolutely, because Gold Money does offer storage, and they offer the ability to move in and out of the system on credit and debit cards. Absolutely.

James West:   So would it be appropriate to ask you, what is the Sprott organization’s outlook for the price of gold going forward in the future?

Peter Grosskopf:   Of course, yeah, yeah!

James West:   Good.

P.G. Yeah, so you mentioned that earlier, as to whether gold is gaining or losing versus cash, and I would say cash is actually losing. Cash is losing because you’ve got inflation, and so the cash is worth less in terms of its ability to buy goods and services going forward. I think gold will outperform cash, and it has actually outperformed cash in almost every year. It doesn’t every year, but for the most part, if an individual can say I can hold a US dollars, Canadian dollars in Canada, or gold, I think there is a heck of a case to be made that you should be holding at least a serious portion of your cash in gold, because gold is going to do better than cash over time: it’s just more inflation protected.

James West:   And so by extension, is silver part of this equation?

Peter Grosskopf:   It is. Silver will be offered on the One Gold platform as well, so identical that way. Of course, silver is a much smaller market than gold, a little bit less liquid, and the proverbial axiom of that market I think will hold true, which is, when gold moves bullish, and is having a bull move, silver will usually move more than gold. So it’s just a smaller market; it gets squeezed easier.

James West:   Sure. So the – I’m always sort of been of, I mean, the gold market scares me, because it strikes me that there’s an inconsistency in the ability of gold to accurately reflect value in the context of actual demand and supply, because there’s this layer overlaying the physical gold market that we call the futures market, which trades multiple in the volume of gold on a daily basis, and sort of doesn’t really make sense to me in the sense of what the value proposition of a future is, which used to be price discovery mechanism, and it now seems to be more a price determination mechanism. And so does the price of gold, and this is one of the reasons why I hesitate to, even though this new platform makes it easier and the costs are going to be lower and the risks associated with holding it lower, I’m still concerned that the price of gold is not able to reflect the value of gold because of this futures market disconnect.

Peter Grosskopf:   Okay, I’m going to break it down if I can. Your concern is valid, and the futures market and macro-traders do drive the price of gold, especially in the short term – the trading volume in the gold market would shock anyone in terms of total volume and dollar value of trades. Its’ a very liquid market, and it gets driven by macro-traders which influence the price through their trading of the futures markets. So that’s valid.

But in the long term, gold’s price determination will occur based on whether people would rather hold it versus cash, or not. Like, the long-term ownership of gold will always be determined by that, and we think, favourably so. We think people will rather hold gold than cash in the long run.

So then coming back to the first part of your question, does that, you know, does that futures and macro-trading, will it hurt me holding gold? Well, I don’t think so; I think it’s going to help you just as much as it’s going to hurt you, because when the macro traders get scared of what’s going on in the other markets, they’re going to come into gold and drive it higher. I think on balance, it’ll be a positive move going forward.

James West:   Sure, interesting. The prospect of owning digital gold, and the reason that that email kind of excited me, is because I think that in some respects, the generation, the Millennials who are now evolving into the mainstream, who would have normally been the avatars of gold as libertarian-minded individuals, you know, they’re sort of, their attention span has been sidetracked into this cryptocurrency universe when, you know, the whole discussion of the value and the fundability and the security and the privacy and all of these things, it’s interesting to me because these same arguments are actually what drive the argument for gold.

Peter Grosskopf:   Yes they are, they’re philosophically the same.

James West:   Exactly. And yet they, you know, uniformly are against the idea of gold as, you know, that’s your grandfather’s equity play; ours is our own digital currency. And this looks like a way to bridge that gap.

Peter Grosskopf:   Yeah. They had a point, right, because cryptos were incredibly easy to trade, mobile or via your crypto-trading house, and you could zip them around the internet at lightning fast speeds, and the whole thought that this was a unit of currency that was outside of the FIAT-controlled currency systems, and it was super easy to use, and it was also, by the way, going up a lot – so it attracted a lot of attention from every type of investor, because it was going up a lot.

Look, that was compelling, but gold needed to respond to the challenge. Gold needed to attach itself to some of the new technologies, to become usable, fast, razor-thin margins, and you know, quite frankly, more appealing to a younger and more technologically savvy user base. So I think it takes a step int hat direction.

James West:   Sure. So what is necessary to become a participant in the One Gold system? Do you have to be an accredited investor, do you have to be a client of size?

Peter Grosskopf:   No.

James West:   Can I be a Millennial with $500 to invest?

Peter Grosskopf:   That’s right. You can open an account at any size. You do need to fill out a short client application as you would for almost any kind of website these days, so as long as they know who you are, you can have that account, you can buy and sell and trade at any price. So that’s a huge advantage compared to the commercial banking system, and even the brokerage system, which has, in many cases, account minimums, fairly high percentage trading charges, especially for low transaction values, right? So we’re getting past all that.

James West:   Interesting. Okay, so where do I go to start this process?

Peter Grosskopf:   Just go online:

James West:   Okay, well that’s great, Peter. That’s a very revealing conversation; thank you very much for joining me today.

Peter Grosskopf:   Okay, thanks for having me.


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