Gold diversified: Gold on the blockchain

There is a British artist called Martin Creed whose work I like. One reason I like Creed’s work is that he steers clear of connecting his work to some esoteric philosophy, like many artists (unsuccessfully?) do these days. Instead, the underlying theme for a lot of his work is indecisiveness and the fear of making the wrong decision. So, for example, rather than committing to a particular colour palette in a painting, Creed will use all the colours available in a pre-made painting set (like which, shown in the painting below). This way, he avoids the anxiety of making the wrong decision and fretting over the opportunity costs.

What does this have to do with Gold?

The connection I am making between Martin Creed and Gold is this:

There are many different methods for investing in Gold. When you can’t decide on the best investment type or don’t know how to evaluate the best decision, perhaps it’s best to go with them all.

Like the strategy of diversifying a complete investment portfolio, you can diversify the subsections of your portfolio. In the case of Gold, the different investment options all have their specific benefits and drawbacks, incentivising diversification in the asset.

There are traditional options to gain exposure to Gold, such as physical bars and coins, ETFs, shares in mining companies, and CFDs. But a few new blockchain options have cropped up in the recent past, which could require some attention.

Diversify into Blockchain Gold?

Blockchain Gold comes in two primary forms.

The first is the ubiquitous Bitcoin, otherwise called Digital Gold. While not precisely ‘Gold’, the asset has recently rebranded itself as a store of value and is seeking to usurp some of the bullion market. It is safe to say that if you had diversified into this ‘Gold’ at any time in the past three years (excluding the past month), your returns would have been incomparable greater than the traditional investments listed above. In this respect, I’m sure this missed opportunity has caused many investors anxiety or regret.

Tokenised Gold is the second blockchain option. It is, as its name suggest, tradable tokens backed by physical bullion held. The gold is typically stored in Central Bank-grade vaults. The advantage of tokenised Gold over physical Gold is improved liquidity. Granted this is predicated on demand for tokenised Gold and the network security remaining. However, ETFs offer a very similar product without the wild-west aspect inherent in the crypto-sphere. Even so, tokenised Gold took off in 2020, as illustrated by the above graph by Arcane Research.

Last note: Buy art instead?

Perhaps an investment in the art of Martin Creed or other artists is preferred over Gold. After all, art investments’ have essentially outperformed all investment vehicles over the past few decades. Not to mention, if diversifying is your game, then the art world has your back. For example, at your local art fair, you could pick up a conservative landscape painting, while at the same time, something akin to a sculpture consisting of a banana taped to the wall.