stats
globeinteractive.com: Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /globeandmail.com
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space


Search

space
  This site         Tips

  
space
  The Web Google
space
   space



space

  Where to Find It


Breaking News
  Home Page

  Report on Business

  Sports

  Technology

space
Subscribe to The Globe

Shop at our Globe Store


Print Edition
  Front Page

  Report on Business

  National

  International

  Sports

  Arts & Entertainment

  Editorials

  Columnists

   Headline Index

 Other Sections
  Appointments

  Births & Deaths

  Books

  Classifieds

  Comment

  Education

  Environment

  Facts & Arguments

  Focus

  Health

  Obituaries

  Real Estate

  Review

  Science

  Style

  Technology

  Travel

  Wheels

 Leisure
  Cartoon

  Crosswords

  Food & Dining

  Golf

  Horoscopes

  Movies

  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...

space

Services
   Where to Find It
 A quick guide to what's available on the site

 Newspaper
  Advertise

  Corrections

  Customer Service

  Help & Contact Us

  Reprints

  Subscriptions

 Web Site
  Advertise

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


GiveLife.ca

    

PRINT EDITION
Gold, cryptocurrencies and the five-year rule
space
space
By IAN MCGUGAN
  
  

Email this article Print this article
Friday, November 10, 2017 – Page B1

There's an old rule in investing that insists whatever asset is red hot right now will be ice cold in five years. The latest evidence for that maxim comes from the gold sector.

Appetite for the precious metal hit a peak in 2012. It has since slumped to its lowest point since 2009, according to a World Gold Council report published on Thursday.

Demand for bullion slipped to 915 tonnes in the third quarter, which is 23-per-cent less than the frenzied level reached five years ago.

The most recent reasons for the sliding demand were the impact of Indian taxes and a decline in buying by exchange-traded funds during the past quarter. The more fundamental issue, though, is fashion. To many eyes, gold now looks like a fusty relic when matched up against the more contemporary glories of bitcoin.

Linking the two assets is no accident. Both appeal to the same group: folks who believe there's something rotten in the state of the global financial system and want a way to profit from what they believe will be the inevitable decline of paper currencies.

Since gold and bitcoin appeal to similar audiences, many of the same promoters and brokers who used to peddle shares of small gold miners to retail investors are now busily selling that same audience on the opportunities in cryptocurrencies.

Frank Giustra, the Vancouverbased promoter who made a fortune bringing junior miners to market, is now backing Hive Blockchain Technologies Ltd., which uses data servers to mine for digital riches.

Meanwhile, Canaccord Genuity Corp., the Canadian investment bank with deep roots in mining, is leading a financing for a cryptocurrency startup with the beguiling name of Global Blockchain Technologies Corp. Even tiny players such as MX Gold Corp. are getting into the game. The Vancouver miner recently signed a letter of intent to buy a blockchain business in Manitoba.

There's a certain element of hilarity in watching mining executives and promoters rejig their usual narratives to suit the times. ("Did we say you had to own real assets? What we really meant to say was that you have to buy immaterial electronic tokens instead.") But it's hard to blame the promoters for giving the public what it wants. Google searches for "buy bitcoin" have now overtaken "buy gold," according to Bloomberg.

The shift in popular taste poses a big problem for the major gold miners and other issues don't help. One headwind is the prospect of higher interest rates ahead. Rising rates reduce the appeal of gold because the metal doesn't pay any dividend or produce any yield. As the payoff from other investments grows, the lure of gold diminishes.

To add to gold's challenges, recent events have underlined the sector's vulnerability to politics. Acacia Mining PLC, an African gold miner, was recently hit with a massive tax bill by Tanzanian authorities and will have to shell out $300-million (U.S.) in a settlement brokered by its controlling shareholder, Barrick Gold Corp.

Meanwhile, Eldorado Gold Corp. has announced that it's mothballing its Skouries project in Greece after years of frustrating permit delays.

Compared with prospecting for gold in remote locations and wrangling with local authorities for permission to mine it, peddling bitcoin and other cryptocurrencies seems like a sweet deal indeed. But investors who are hearing the digital hype may want to remember how fickle the market can be.

Rising interest rates are going to challenge bitcoin just as much as they do gold since both are nonyielding assets. As for politics, bitcoin has yet to face a full-scale regulatory assault, but you can be sure one will be coming if cryptocurrencies continue to attract money and keep on being linked to tax evaders and other members of the dark economy.

Then there's the fundamental question of what makes any asset valuable. Gold at least has the force of tradition behind it. Bitcoin, at the moment, seems to be riding nothing more than a dim sense that blockchain technology may turn out to be useful.

Remember the five-year rule: My bet would be that investing in bitcoin in 2022 will seem just as unappealing as gambling on gold does now.


Huh? How did I get here?
Return to Main Paul_Sullivan Page
Subscribe to
The Globe and Mail
 

Email this article Print this article

space  Advertisement
space

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.

Advertisement

7-Day Site Search
    

Breaking News



Today's Weather


Inside

Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes


Editorial
Where Manley is going with his first budget




space

Columnists



For a columnist's most recent stories, click on their name below.

 National


Roy MacGregor arrow
This Country
space
Jeffrey Simpson arrow
The Nation
space
Margaret Wente arrow
Counterpoint
space
Hugh Winsor  arrow
The Power Game
space
 Business


Rob Carrick arrow
Personal Finance
space
Drew Fagan arrow
The Big Picture
space
Mathew Ingram arrow
space
Brent Jang arrow
Business West
space
Brian Milner arrow
Taking Stock
space
Eric Reguly arrow
To The Point
space
Andrew Willis arrow
Streetwise
space
 Sports


Stephen Brunt arrow
The Game
space
Eric Duhatschek arrow
space
Allan Maki arrow
space
William Houston arrow
Truth & Rumours
space
Lorne Rubenstein arrow
Golf
space
 The Arts


John Doyle arrow
Television
space
John MacLachlan Gray arrow
Gray's Anatomy
space
David Macfarlane arrow
Cheap Seats
space
Johanna Schneller arrow
Moviegoer
space
 Comment


Murray Campbell arrow
Ontario Politics
space
Lysiane Gagnon arrow
Inside Quebec
space
Marcus Gee arrow
The World
space
William Johnson arrow
Pit Bill
space
Paul Knox arrow
Worldbeat
space
Heather Mallick arrow
As If
space
Leah McLaren arrow
Generation Why
space
Rex Murphy arrow
Japes of Wrath
space
Rick Salutin arrow
On The Other Hand
space
Paul Sullivan arrow
The West
space
William Thorsell arrow
space





Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page