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BullionStar Wins First Place in Bullion Directory’s 2018 Awards

BullionStar has won Best Bullion Dealer "Rest of World" in the 2018 Bullion Directory bullion dealer Awards.

Bullion Directory is an online directory which lists over one thousand bullion dealers across the world. Each year, Bullion Directory runs its global awards competition where winners are decided by the voting public.

BullionStar secured the Bullion Directory award after being shortlisted during a first round of voting whose results were announced on 18 December last. The main vote then ran from 15 January to 23 February, with the winners announced on Friday 9 March.

The competition for the Award was strong, with bullion dealers shortlisted in the Rest of the World category being Tanaka Gold of Japan and GoldPark (Mitsubishi) of Japan, as well as Bullion India and RiddiSiddhi Bullions, both based in India. In the first round, the Rest of World category saw bullion dealers from 12 countries, such as Switzerland, Singapore, Hong Kong, Japan and India, compete to be selected in the final shortlist of five companies.

BullionStar secured 32.6% of the votes in the final round, ahead of 2nd place RiddiSiddhi Bullions of India on 28.4% of the votes. In third place was Tanaka Gold of Japan with 18.1% of the votes.

BullionStar's shop and showroom in central Singapore

Commenting on the win, BullionStar CEO Torgny Persson said, "We’re delighted to have been voted the #1 Bullion Dealer of the Year 2018! This award bears testament to our success in breaking new ground by introducing modern technology into the age-old precious metals industry."

Mr. Persson added, "BullionStar has been growing tremendously over the last few years despite the precious industry consolidating as a whole and we’re pleased that this success has been recognized by being voted the #1 Bullion Dealer of 2018.

Bullion Directory Awards

On BullionStar's award achievement, Bullion Directory commented that:

"BullionStar could not be a more appropriate winner in our all-new Rest of World category, with a rapidly-growing customer base across the globe looking to buy and store precious metals in their vault."

Based in Singapore and catering to the local, global and offshore storage markets, BullionStar’s reach is phenomenal thanks to its low prices, high levels of customer care and now legendary precious metals analysis and market coverage."

Bullion Directory's Best Bullion Dealer 'Rest of the World' award is a new category for 2018. Prior to this year, the Bullion Directory awards were limited to bullion dealers based in the UK, USA, Canada, Australia and UAE, with a winner selected in each of those 5 country categories.

Next year for 2019, Bullion Directory plans to expand its coverage and split the Rest of World category into a number of distinct regional categories.

The full list of winners of the 2018 Bullion Directory awards can be seen on the Bullion Directory website.

BullionStar's listing on the Bullion Directory website can be seen here.

Why QE didn’t send gold up to $20,000

This blog post is a guest post on BullionStar's Blog by the renowned blogger JP Koning who will be writing about monetary economics, central banking and gold. BullionStar does not endorse or oppose the opinions presented but encourage a healthy debate. 

Why didn't quantitative easing, which created trillions of dollars of new money, lead to a massive spike in the gold price?

The Quantity Theory of Money

The intuition that an increase in the money supply should lead to a rise in prices, including the price of gold, comes from a very old theory of money—the quantity theory of money—going back to at least the philosopher David Hume. Hume asked his readers to imagine a situation in which everyone in Great Britain suddenly had "five pounds slipt into his pocket in one night." Hume reasoned that this sudden increase in the money supply would "only serve to increase the prices of every thing, without any farther consequence."

Another way to think about the quantity theory is by reference to the famous equation of exchange, or

  • MV = PY
  • money supply x velocity of money over a period of time = price level x goods & services produced over that period

A traditional quantity theorist usually assumes that velocity, the average frequency that a banknote or deposit changes hands, is quite stable. So when M—the money supply— increases, a hot potato effect emerges. Anxious to rid themselves of their extra money balances M, people race to the stores to buy Y, goods and services, that they otherwise couldn't have afforded, quickly emptying the shelves. Retailers take these hot potatoes and in turn spend them at their wholesalers in order to restock. But as time passes, business people adjust by ratcheting up their prices so that the final outcome is a permanent increase in P.

In August 2008, before the worst of the credit crisis had broken out, the U.S Federal Reserve had $847 billion in money outstanding, or what is referred to as "monetary base"—the combination of banknotes in circulation and deposits held at the central bank. Then three successive rounds of quantitative easing were rolled out: QE1, QE2, and QE3. Six years later, monetary base finally peaked at $4.1 trillion (see chart below). QE in Europe, Japan, and the UK led to equal, if not more impressive, increases in the domestic money supply.

U.S. monetary base (banknotes and deposits at the Fed)

So again our question: if M increased so spectacularly, why not P and the price of gold along with it? Those with long memories will recall that while gold rose from $1000 to $2000 during the first two legs of QE, it collapsed back down to $1000 during the last round. That's not the performance one would expect of an asset that is commonly viewed as a hedge against excess monetary printing.

How Regular Monetary Policy Works

My claim is that even though central banks created huge amounts of monetary base via QE, the majority of this base money didn't have sufficient monetary punch to qualify it for entry into the left side of the equation of exchange, and therefore it had no effect on the price level. Put differently, QE suffered from monetary impotence.

Let's consider what makes money special. Most of the jump in base money during QE was due to a rise in deposits held at the central bank, in the U.S.'s case deposits at the Federal Reserve. These deposits are identical to other short-term forms of government debt like treasury bills except for the fact that they provide monetary services, specifically as a medium for clearing & settling payments between banks. Central banks keep the supply of deposits—and thus the quantity of monetary services available to banks—scarce.

Regular monetary policy involves shifting the supply of central bank deposits in order to hit an inflation target. When a central bank wants to loosen policy i.e. increase inflation, it engages in open market purchases. This entails buying treasury bills from banks and crediting these banks for the purchase with newly-created central bank deposits. This shot of new deposits temporarily pushes the banking system out of equilibrium: it now has more monetary services than it had previously budgeted for.

To restore equilibrium, a hot potato effect is set off. A bank that has more monetary services then it desires will try to get rid of excess bank deposits by spending them on things like bonds, stocks, or gold. But these deposits can only be passed on to other banks that themselves already have sufficient monetary services. To convince these other banks to accept deposits, the first bank will have to sell them at a slightly lower price. Put differently, it will have to pay the other banks a higher price for bonds, stocks, or gold. And these buyers will in turn only be able to offload unwanted monetary services by also marking down the value, or purchasing power, of deposits. The hot potato process only comes to a halt when deposits have lost enough purchasing power, or the price level has risen high enough, that the banking system is once again happy with the levels of deposits that the central bank has injected into the system.

What I've just described is regular monetary policy. In this scenario, open market operations are still potent.  But what happens when they lose their potency?

Monetary Impotence: Death of the Hot Potato Effect

A central bank can stoke inflation by engaging in subsequent rounds of open market purchases, but at some point impotence will set in and additional purchases will have no effect on prices. When a large enough quantity of deposits has been created, the market will no longer place any value on the additional monetary services that these deposits provide. Monetary services will have become a free good, say like air—useful but without monetary value. Deposits, which up to that point were unique thanks to their valuable monetary properties, have become identical to treasury bills. Open market operations now consists of little more than a swap of one identical t-bill for another.

Zimbabwe 100 trillion dollar notes together with gold bullion
100 Trillion Dollar Notes are not yet required to purchase gold. Why hasn't the increased money supply significantly increased the gold price?

When this happens, subsequent open market purchases are no longer capable of pushing the banking system out of equilibrium. After all, monetary services have become a free good. There is no way that banks can have too much of them. Since an increase in the supply of deposits no longer has any effect on bank behavior, the hot potato effect can't get going—and thus open market purchases have no effect on the price level, or on gold.

This "monetary impotence" is what seems to have overtaken the various rounds of QE. While the initial increase in deposits no doubt had some effect on prices, monetary services quickly became a free good. After that point, the banking system accepted each round of newly-created deposits with a yawn rather than trying to desperately pass them off, hot potato-like.

And that's why gold didn't rise to $20,000 through successive rounds of QE. Gold does well when people find that they have too much money in their wallets or accounts, but QE failed to create the requisite "too much money".

The Blockchain Beyond Bitcoin

The rapid emergence and commercialization of blockchain technology is undoubtedly one of the key technological trends at the moment, not just within crypto currencies, but as a disruptive technology across many industries and economic functions.

At a high level, a blockchain is a distributed and public digital ledger of transactions that is updated across a peer-to-peer network, and that uses cryptography to record and update the chain of blocks that make up the ledger. Within a blockchain structure, there is no central authority.

What is a Block Chain?

The essence of a decentralised blockchain network is actually explained quite simply in the introduction to the whitepaper of the world’s first implemented blockchain, Bitcoin, i.e. Sataoshi Nakamoto’s now famous Bitcoin whitepaper which was titled “Bitcoin: A Peer-to-Peer Electronic Cash System”.

In the Bitcoin peer-to-peer network, as devised by Nakamoto, network transactions are processed by cooperative nodes on the network and then stored in an ongoing chain of updates that cannot in practice be altered. The processing works by taking a number of transactions, gathering them into a block, and then hashing them, while also referencing the previous block of data.

In general, hashing refers to the process of converting a string of data into a fixed length value. The hashing function takes in the input string and outputs the hashed value. The Bitcoin protocol uses a block hashing algorithm where transactions are timestamped, with each hash output containing its own timestamp and the timestamp of the previous block. This allows the blocks to be hashed into an ongoing chain of blocks. Hence the term block chain or blockchain.

Within the Bitcoin network, the hashing is done by competing computing nodes on the network which are known as miners, and the hashing is designed so that significant mathematical effort (and CPU power) are required to produce the correct hash that will satisfy hash formatting rules, but that will also be easily identifiable as a valid block by all other nodes. The system of calculations that produce the blocks that can pass this validity check is referred to as a proof of work (PoW) system.

The mining process is therefore essentially adding new transactions to the blockchain with the inputs to the hash function being the transactions on the network which have not yet been validated or confirmed. Once a new block is accepted, all miners will switch to working on validating the next block.

Although the network is decentralised, the nodes on the network don’t need to trust each other or coordinate with each other. They can all examine the latest block created and accept its validity, therefore accepting that the longest chain is the valid chain. All the nodes or participants in the network can therefore reach consensus even though they don’t know each other and don’t communicate with each other. In the Bitcoin network, the miner which successfully solves the hash of a new block will receive an incentive for their work in the form of new bitcoins.

This continual chaining of blocks means that the resulting blockchain is irreversible and permanent, with every transaction in the history of the network being recorded in perpetuity. A properly maintained blockchain is therefore a public record that cannot be altered or tampered with.

Grasping this essential nature of a blockchain should help explain why Blockchain as a technology is variously described as a “public ledger”, a “distributed ledger”, or as a “globally decentralized public accounting ledger”. Any venture that promotes itself as using blockchain should be in some way using the technology described above or a variant of it.

The Emerging Competition to Bitcoin

Since the launch of Bitcoin nine years ago in January 2009, the blockchain technology and design concepts inherent in Bitcoin have served as the foundation for many other cryptocurrencies and blockchain innovations. There are now over 1500 exchange-traded cryptocurrencies (coins and tokens) listed on the crypto coin tracking site which back these mostly blockchain ventures.

As in any competitive market, many of these coins and the companies backing them will most likely not survive over time and will disappear. However, in addition to Bitcoin (currently valued at approximately $170 billion), there are multiple coins alternative to Bitcoin (alt coins) which use block chain models, and which the ‘market’ continues to put a significant value on, based on the current trading prices of their coins /tokens and the market capitalisations of these coins / tokens.

Litecoin (currently valued at over $12 billion) used much of the same design as Bitcoin when it first released in October 2011, while introducing some coding changes such as a shorter block generation time and a different hashing algorithm.

Bitcoin Cash (valued at over $20 billion) was created on 1 August 2017 via a hard fork when the Bitcoin blockchain split into two separate chains. While the block size in Bitcoin is 1 MB, Bitcoin Cash has an increased block size of 8 MB. Bitcoin Cash allows for processing of more transactions per second than Bitcoin, which should translate into faster payments. In the short time since its launch, Bitcoin Cash has seen widespread adoption by a supportive community of developers as well as encouraging take-up by merchants and listings on many cryptocurrency exchanges. It is also supported by some high-profile names in the Bitcoin community such as Craig Wright, Roger Ver and Calvin Ayre.

Ethereum (valued at approximately $80 billion), which launched in 2015, is a distributed public blockchain system and platform that significantly extends the blockchain concepts first used in Bitcoin, and in addition to transaction processing, it also supports smart contract functionality.

Smart contracts are self-executing contracts. In technical terms, smart contracts are small software programs that live and run on a blockchain and that are replicated across the blockchain ledger. In terms of function, smart contracts are agreements which are coded so that they will only be triggered or executed when the terms of the agreement are validated. The contract logic of Ethereum smart contracts runs in a run-time environment called the Ethereum virtual machine.

The Ethereum network, co-founded by Vitalik Buterin, uses a cryptocurrency called Ether, abbreviated to ETH. Ethereum also currently uses proof of work (PoW) to prove the validity of blocks and rewards miners with ETH for processing new blocks. ETH is also used to pay for the fees levied to run Ethereum smart contracts. Ethereum will in the future move to a Proof of Stake (PoS) algorithm for awarding and allocating new blocks. Proof of Stake is based on assessing the validator’s economic stake in the platform, for example, does it hold the platform’s currency (e.g. ETH).

The Ethereum platform also supports an open source software protocol that allows software developers to build their own distributed blockchain applications or Decentralised Applications (DApps). Over 1100 DApps have already been developed using the Ethereum Platform. For example, Golem, which is a project that aims to link worldwide computers together to harness their idle processing power, is an Ethereum based DApp.

As of the time of writing, Bitcoin Cash was processing over 20,000 transactions per day. The average transaction fee on the network was 0.217 US dollars. The average time between blocks (block time) for Bitcoin Cash was 10 minutes. Similar processing statistics for Bitcoin showed that the Bitcoin network processed 215,000 transactions during the same period, with an average transaction fee of 3.04 US dollars, and a block time of 8 minutes 5 seconds. During the same time, the Ethereum network processed 835,000 transactions with an average transaction fee of 0.865 US dollars, and a block time of 15 seconds.

A relatively new blockchain platform called Cardano (currently valued at more than $9 billion) is also being valued by the market as having significant potential. Like Ethereum, Cardano is an open source decentralised public blockchain with its own cryptocurrency called ADA. The Cardano platform is also developing smart contracts and decentralised applications (DApps).

Purchase Precious Metals at BullionStar using Cryptos

BullionStar is committed to offering customers flexibility and choice when transacting on the BullionStar website and in the BullionStar shop and showroom in Singapore. As such, BullionStar facilitates the use of Bitcoin as a payment currency in addition to 6 major national currencies (Singapore Dollars, Euros, US Dollars, Japanese Yen, Australian Dollars and Swedish Krona). This ability to use Bitcoin to buy gold bars, gold coins, silver bars, and silver coins has been available to BullionStar customers since 2014.

All of the features of BullionStar's website are also fully integrated with Bitcoin. When selected from the Currency drop-down menu at the top right hand side of the BullionStar website homepage, Bitcoin becomes the default transactional currency within the website, and all product prices, spot prices, chart data, and account history will be displayed in Bitcoin. When logged into their accounts on the BullionStar website, customers can view their vault portfolios and cash balances and account history all in terms of BTC.

Bitcoin is fully integrated into BullionStar's website functionality

Benefits of Block Chain

Overall, some of the benefits of using blockchain technology include the following:

  • A blockchain, as long as it’s up and running, will continue to exist, so is a permanent record independent of any central authority. As its decentralized, there is no single point of failure, and the data can’t be lost because it is replicated across nodes.
  • Transactions that have been committed to a public blockchain are in practice irrevocable, which means that they cannot be changed, tampered with, or deleted, i.e. they are immutable.
  • Transactional data sent through a blockchain is encrypted and secure from interception
  • Blockchains, as distributed and decentralized platforms, offer dis-intermediation from often inefficient and costly intermediaries. They therefore offer efficiency improvements and cost savings compared to the frictions and costs associated with intermediaries.
  • Transacting currency across a decentralised blockchain between accounts, such as over the Ethereum platform, is far faster than over a centralized legacy bank transfer system.
  • Blockchain platforms that support smart contracts offer the potential to radically alter a whole range of industries that up until now have relied on the centralized execution of agreements and the obligations and terms of those agreements.
  • A public blockchain is a persistent and permanent ledger of transactions and data, accessible for anyone to see and to audit. It therefore enhances transparency, as well as hinders censorship.

Applicability of Block Chains

While the implementation of blockchain applications to the world’s industries is still in its infancy, the potential to alter existing economic systems appears far reaching, such as in financial services, real estate, legal services, government services, supply chain management, and energy markets.

For example, in the investment asset and property management sectors, ownership rights, title deeds and transactions could be recorded in blockchain ledgers, potentially altering the core processes of the asset management and property law sectors.

In the government sector, blockchain applications could be applied to electoral registers, voting records and polls, which is especially promising as blockchain data once committed can’t be altered or hacked. This would also increase transparency, trust and confidence in electoral and voting systems. Block chains also have potential to be used for digital identity and authentication functions such as passports, birth certificates, and other forms of government issued identification.

Blockchain records and transactions could also improve transparency in the world of corporate governance, providing transparent records of board level decisions and voting records.

The legal areas of intellectual property, patents, and music royalties are also strong candidates for adopting blockchain transaction and keeping records of ownership as well as the utilization of smart contracts to collect fees. Blockchains and smart contracts can also aid global supply chain management, such as tracking shipments and inventories and re-ordering supplies.

Other areas where smart contracts are seen to be beneficial include online gaming, online gambling, prediction markets, the sharing economy such as ride sharing and accommodation sharing, the trading of computer processing power, decentralized data storage, and decentralized securities exchanges. Overall, smart contracts are in theory applicable to anything that can be programmed, which covers a wide range of agreements and documentation in nearly every industry around the globe.

The Celebration of Chinese New Year

Chinese New Year is probably the most important date in the Chinese calendar, with the event being celebrated throughout China and in Chinese communities around the world. Gold plays an essential part of the Chinese New Year celebrations.

Also known as Lunar New Year, the date on which Chinese New Year falls each year is variable since it follows the Lunisolar calendar, hence the New Year festival is a movable event. However, Chinese New Year usually falls somewhere between 21 January and 21 February and the date is calculated based on the occurrence of a new moon.

This year, Chinese New Year is on Friday 16 February and marks the beginning of ‘Year of the Dog’ and the completion of the preceding ‘Year of the Rooster’. The Chinese calendar follows a 12-year repeating cycle and is also associated with 12 animals of the Zodiac (Sheng Xiao), with each year in the cycle represented by a different animal. The Year of the Dog is the 11th year in the Zodiac cycle. Next year in 2019, Chinese New Year falls on 5 February, and marks the beginning of the 'Year of the Pig', the final year of the cycle.

The 12 animals of the Chinese Zodiac (Sheng Xiao)

People born in the upcoming Year of the Dog are said to be loyal, honest and friendly with a sense of responsibility as well as being intelligent, independent and decisive. And across China, dogs are also considered auspicious and associated with good fortune.

New Year's Day in China also marks the beginning of the Spring Festival. During Spring Festival, there is a 7 day public holiday across mainland China, beginning on Lunar New Year’s Eve and ending on the 6th day of the new lunar year. This year, the New Year public holiday starts on 15 February and lasts until 21 February. The actual Spring Festival then continues and runs up to the 15th day of the new lunar month which coincides with the traditional Lantern Festival. This year the Lantern Festival is on Friday 2 March.

Customs and Traditions across the Spring Festival

Chinese New Year celebrations are predominantly associated with the colour red. Red is traditionally thought to bring good luck and good future while scaring away evil and bad fortune. This tradition is associated with the story of a mythological beast Nian which in Chinese folklore was scared off by the use of red items and loud noises. Hence New Year’s celebrations incorporate red bunting, red hanging lanterns, dragon dances and loud displays of fire crackers, and its also common in China to see red cloths hanging at the entrances to houses during New Year’s festivities. Wearing red clothes is also popular over the festival and is thought to bring good luck.

In China, the New Year festivities incorporate various customs and traditions symbolising the renewal of a new year, the passing of an old year, and the cultivation of good luck. In the week before New Year, people traditionally clean their houses as a way of cleaning out the old. New Year is also a popular time to purchase new items as it signifies a new beginning and the welcoming of a new year.

The gifting of money-filled red envelopes is also popular during New Year across China. These gifts are thought to bring good luck to the recipient, hence they are known as lucky red envelopes. An amount containing the number 8 is particularly auspicious as the number 8 is thought to be lucky and bring prosperity. But apart from the money, the red colour of the envelope is also associated with good fortune.

Reunion Dinner is one of the most important family occasions in the Chinese calendar

The days leading up to New Year are a time of immense travel within China with millions of people on the move as they return home to their families and relatives to celebrate. A particularly important event during this time is the traditional ‘Reunion Dinner’ which takes place on New Year's Eve, and is a traditional dinner celebrated together with family.

Gift Giving for Chinese New Year

Chinese New Year is also one of the most popular times in China for buying physical gold, gold for gift giving, but also for investment given that it's an auspicious time of the year. At the retail level, Chinese gold demand at this time of year sees a noticeable peak as people across China rush to buy gold bars and buy gold coins, especially for gifting.

This is particularly true of gold coins and gold bars with a Lunar New Year theme, a Zodiac animal theme, or that have an association with China. At BullionStar, we have a wide selection of gold coins and gold bars which would make impressive gifts for Chinese New Year for both family and friends.

PAMP Lunar Series 2018 Year of the Dog Gold Bars

Swiss gold refinery PAMP is one of the best known and most prestigious gold bar brands on the market and is especially popular across Asia. This year PAMP celebrates  the 'Year of the Dog'  with a beautifully designed high relief gold bar portraying a dog motif on both the front and the reverse of the bar's surface. These Lunar gold bars are ideal for gifting and for celebrating the good fortune associated with Chinese New Year.

Available in both 100 gram and 1 ounce weights, PAMP's Lunar minted gold bars contain .9999 pure gold and capture the dog's symbolic qualities of loyalty and friendship. The intricate design on the front face features a portrait of an adult dog sitting in front of a kennel. The reverse of each Lunar gold bar cleverly reveals, through a reverse angle of the same scene, a puppy in the kennel sheltered behind the parent dog.

The bars reverse face is also embossed with PAMP’s refinery logo, the weight and purity of the bar, the bar’s unique serial number, and the Swiss assay mark and guarantee of authenticity Essayeur Fondeur.

PAMP Suisse 2018 Year of the Dog Gold Bar

Each PAMP Lunar gold bar comes in a distinctive and secure assay card

Royal Canadian Mint MapleGram 8

The MapleGram 8 from the Royal Canadian Mint is a particularly stylish set of 8 Maple Leaf gold coins presented within an attractive red and gold display card and designed around a Chinese New Year theme. Each of the 8 gold Maple Leaf coins weighs 1 gram and contains 9999 fine gold. Each of the 8 coins in the set also has its own unique 8 digit serial number. The red and gold design of the MapleGram 8 signifies luck and good fortune, while the presence of 8 coins references the auspiciousness of the number 8 in Chinese culture.

MapleGram 8 from the Royal Canadian Mint

Perth Mint Gold Lunar 2018 - Year of the Dog

Another attractive gift option for Chinese New Year are the very popular Lunar themed bullion coins from Australia’s Perth Mint, which for 2018 celebrate the Year of the Dog. These coins are the 11th in the Perth Mint’s current series of Lunar bullion coins.

The Perth Mint’s 2018 Gold Lunar coin is available in 6 weight denominations, namely 2 oz, 1 oz, 0.5 oz, 0.25 oz, 0.1 oz and 0.005 oz, each of which is minted from 0.9999 fine gold. The 1 oz 2018 Gold Lunar has a maximum mintage of 30,000 pieces. The reverse of the Lunar gold coin features a stylish and detailed image of a Labrador Retriever with the Chinese character for "Dog", and "Year of the Dog" is a circular inscription underneath.

Perth Mint Lunar gold coin 2018 - Year of the Dog

Perth Mint Lunar Silver 2018 - Year of the Dog

Also in celebration of Chinese New Year, the Perth Mint has produced a 2018 'Year of the Dog' Silver Lunar coin available in weight denominations of 0.5 oz, 1 oz, 2 oz, 5 oz, 10 oz, and 1 kg, all of which contains 99.99% silver and have a superior finish. The reverse of the 2018 Silver lunar celebrates the new Zodiac with a handsome portrayal of a German Shepherd dog and pup. The coin also displays the Chinese character for "Dog", with a circular inscription underneath of "Year of the Dog". While gold is more popular for gifting at New Year in China, silver coins, especially the bigger ones such as the 1 kg Silver Lunar for 2018, can also be gifted.

In addition, the Perth Mint has also released a Year of the Dog 1 oz proof version of the 2018 Silver Lunar which comes in its own box with a certificate of authenticity, and a Year of the Dog 1 oz proof high relief 2018 Silver Lunar also with its own box and certificate of authenticity.

China Gold Panda Coins

In terms of gold bullion and China, Chinese Panda gold coins are undoubtedly the most famous Chinese gold product on the international market, and would make interesting gift ideas for Chinese New Year. Minted in China by Shenzhen Guobao Mint, this Mint is part of China Gold Coin Corporation, which in turn is owned by the Chinese State.

30 gram Chinese Gold Panda coin 2018 - Year of the Dog

Each year the design on Chinese Gold Panda coins changes, with the reverse of the new 2018 coin featuring a powerful portrait of a Giant Panda feeding on a bamboo shoot. The front of each Gold Panda coin features imagery of the Hall of Prayer for Abundant Harvests in the Temple of Heaven in Beijing.

Gold Panda coins are produced in 5 weight denominations ranging from the flagship 30 gram Gold Panda coin, through to Gold Panda coins weighing 15 grams, 8 grams, 3 grams and down to a 1 gram gold coin. The 30 gram Gold Panda coin, weighing the equivalent of 0.965 troy ounces, is always a popular seller and would make a New Year’s gift to remember. Given that 8 is the luckiest number in China and is associated with prosperity and good fortune, the 8 gram Gold Panda coin is also of interest during the New Year festival.

Heraeus 1 kg Silver Lunar Stacker Bar

The Year of the Dog is also celebrated in a new 1 kg Silver Lunar Stacker Bar from the world-famous Heraeus precious metal refinery in Germany. Each of these 1 kg (32.15 ozs) Heraeus Silver Lunar bars contains 99.9% pure silver and has the words “2018 Year of the Dog” embossed on the bar's front surface along with the bar's weight and fineness “1 Kilo” and “999 FINE SILVER” which encircles a stylised representation of a dog.

Heraeus 1 kg Silver Stacker Bar 2018 - Year of the Dog

The reverse of each of these silver bars features an anti-forgery swirl pattern design for added security, and displays the bar's unique serial number. The Heraeus Silver Stacker bar is designed for easy storage and comprises rectangular beveled surfaces that interlock for ease of stacking.

1 oz Silver Happy Chinese New Year - Lion Dance

Also of interest for Chinese New Year is a 1 oz proof silver “Happy Chinese New Year - Lion Dance” coin produced by Victoria Mint on behalf of the Republic of Chad. The silver coin’s reverse features a colorized depiction of a traditional Chinese Lion dance which is synonymous with good luck and fortune, and the Chinese characters ‘新年快樂’ meaning ‘Happy New Year’. This proof silver coin has been produced by the Mint in a very limited issue of just 1000 coins. Each coin comes with a certificate of authenticity and is presented in a red velvet casing and outer box.

The Role of Gold as Turmoil hits wider Financial Markets

As market turmoil hits both equities and cryptocurrencies, the heightened volatility in these assets underscores gold’s unique role as a safe haven, store of value and portfolio diversifier.

Stock Market Selloffs

With major US stock indices falling again sharply on Thursday (DJIA - 4.02%, NASDAQ - 4.08%, S&P -3.41%), last Monday’s equity market selloff and spike in volatility looks set to be a more prolonged affair than a one-off plunge and recovery. The Dow’s Thursday close of 23860 is 2756 points, or 10.3% lower, than the all time high of 26616 from 26 January, and the Dow is now officially in correction territory. This week also saw two records added to the history of stock market selloffs, Monday’s biggest ever points drop in the Dow, and Thursday’s second biggest ever Dow points drop.

Similarly the S&P 500 index closed on Thursday at 2581 and is now 292 points, or 10.1% lower than its all-time high of 2,872.87 from 26 January, again in correction territory.

The NASDAQ composite, which also reached its all-time high of 7505 on 26 January, is virtually in a 10% correction zone below 6755, as it closed just a few points over this level at 6777 on Thursday.

Finally, the CBOE Volatility Index (VIX), the widely used measure of stock market volatility - which is also known as the investor fear gauge - had spiked up massively late Monday and into Tuesday to the 35-40 range, and critically was again seen approaching those levels at Wall Street market close Thursday.

Equity market indexes across the globe, as normal taking their cue from Wall Street trading, have also been falling in tandem, with markets in Europe, Asia and the Americas all lower on the week.

Whatever the reasons for the shift change in market sentiment, from macro factors to algorithmic trading, these abrupt index plunges and the rise in volatility have spooked investors across the globe and have led to panic selling and active profit-taking. With a low volatility environment less certain than before, market consensus on ever-increasing stock prices may be beginning to unravel.

Clouds over Cryptocurrencies

In cryptocurrency markets, the price euphoria seen in December and early January led by Bitcoin and some other large alt coin rivals has also given way to deep corrections and unclear price direction.

Until earlier this week when Bitcoin rallied back to above $8000 from below $6000, Bitcoin’s price had been on a consistent downward trajectory for nearly a month. From its intermediate high of US $17,000 on 7 January, in less than 30 days, the price had collapsed to below US $ 6,000, an approximate 65% drop. From the ultimate high of just over $20,000 on 17 December to the recent low of below $6000, Bitcoin’s price collapse exceeded 70%. Similar price movements were seen across the board in other crypto coin prices, both large and small cap.

Coupled with Bitcoin’s equally sharp price gains in late 2017, the short-term price movements of Bitcoin, both up and down, are hugely volatile. As recently as a year ago in early February 2017, Bitcoin in US dollars was still trading in the $1000 range. It was only in May 2017 when the price first breached the $2000 mark and August when it initially hit the $3000 range. As its meteoric rise continued, by late October the price had again doubled to $6000, and it was just mid-November 2017 (less than 3 months ago) when the Bitcoin price first traded in the $8000 range, a similar price range to where it now finds itself back at now.

Mid-November is also arguably the point at which Bitcoin’s dizzying ascent really got going, shooting up to over $11,000 before the end of November. It was at this point that hundreds of smaller alt coin prices started to really explode upwards also, taking the broad cryptocurrency market and the overall sector MarketCap much higher.  Within a week between 1 December and 8 December, the Bitcoin price had again exploded to over $18,000, and the ultimate peak of $20,000 was reached less than 10 days later on 17 December.

After this, a series of lower highs and lower lows saw the Bitcoin price oscillate wildly in the $12,000 - $18,000 range before its prolonged fall from 7 January onwards to below $6000 on Tuesday 6 February, and its subsequent bounce  to $8000. This high price volatility must raise the question of Bitcoin as store of value, and to what extent it is primarily a payment system versus a dependable store of value.

Gold's Attraction in Market Turmoil

Investors in financial and other asset markets prefer predictability and stability. Hence investor apprehension at the growing uncertainty and heightened volatility in global stock markets and the recent pump and dump chart patterns of many cryptocurrencies.

But it is during market turmoil that gold’s safe haven qualities come to the fore. Since gold has no counterparty or default risk it is a universally known and universally used safe haven for preserving wealth during market crises. Gold's high liquidity also adds to its safe haven appeal. During financial market turmoil, gold's price therefore generally reflects this movement out of risk assets and into the safe harbour that gold provides. The below chart plots a relatively comparison between the US dollar price of gold and the S&P 500 index, over the week beginning Monday 5 February, showing gold's outperformance as the US stock market suffered a series of selloffs.

USD Dollar Gold Price in terms of the S&P 500 Index, Week from 5 February 2018. Source: BullionStar Charts

Gold is also one of the traditional and best-known stores of value, some others being land and property. A reliable store of value asset will allow you to park your wealth and retrieve it at a later time knowing that it will still have value and will have retained the value that it had when you converted some of your savings or wealth into that asset. A reliable store of value will also adjust for inflation and retain its purchasing power relative to inflation. Physical gold in the form of gold bars and gold coins does just that and retains its purchasing power over long periods of time precisely because the gold price, as an inflation barometer, adjusts to reflect expected inflation.

Finally, gold can also reduce the volatility of a portfolio of investment assets such as stocks and bonds. By adding an investment in gold, the resultant portfolio displays less volatility of returns, and can also exhibit higher expected returns. This is due to the gold price having a low to negative correlation with the prices of securities such as stocks and bonds.

Should we Restore the Gold Standard?

This blog post is a guest post on BullionStar's Blog by the renowned blogger JP Koning who will be writing about monetary economics, central banking and gold. BullionStar does not endorse or oppose the opinions presented but encourage a healthy debate. 

Would it make sense to rebuild an international gold standard like the one we had in the late 1800s? Larry White says the idea has merit, David Glasner believes it isn't worth the risk. Over the years I've followed the back-and-forth between these two blogging economists, each of whom has done an admirable job defending their respective side for and against the gold standard. Let's look at one or two of the most important themes running through the White v Glasner debate.

Like a ruler measures distances, a nation's monetary standard serves as a measuring stick for the value of goods and services. People need to be able to set sticker prices with the unit, calculate profit and loss, negotiate labour contracts, and establish the terms of long-term debts using it. If the measuring stick is faulty, then all these important tasks becomes unnecessarily difficult.

Gold as Unit of Account

Since 1971 our measuring stick has been irredeemable paper currency, or a fiat money standard. Central banks try to ensure that, within the confines of their nation, the general level of domestic consumer prices stays constant, or at least rises at a constant rate of around 2-3%. And while the first decade of the fiat standard was a disaster characterized by high and rising inflation, central bankers in developed nations have generally managed to keep inflation on track for the last thirty or so years.

To re-establish gold as the measuring stick, each nation's unit of account—say the $ or ¥ or £—would have to be redefined as a certain fixed number of ounces of gold. Banknotes and central bank deposits, which are currently inconvertible, would be made convertible into an appropriate amount of gold. It is important that all nations return to the gold standard rather than just one, because one of the big advantages of an international gold standard is that with all currencies pegged to gold, it is much simpler for citizens of one nation to make calculations using another nation's unit. And this makes cross-border trade and investment easier to engage in.

Should banknotes and electronic fiat currency once again be made convertible into gold?

In Favour of the Gold Standard: Larry White

How well have the two standards served as measuring sticks? As the chart below illustrates, year-to-year changes in U.S. consumer prices were quite variable during the classical gold standard era, rising some years and falling the next. The source for this chart is from this paper that White has coauthored with George Selgin and William Lastrapes. The classical gold standard from which the authors draws their data lasted from 1880—when the majority of the world's major nations defined their currency in terms of the gold—to 1914 when the gold standard was dismantled on the eve of World War I. Data shows that the fiat standard that has been in place since 1971 demonstrates more predictable year-to-year price changes. Citizens of developed nations are pretty safe assuming that next year, domestic prices will rise by 2-3%.

Quarterly US inflation rate, 1875 to 2010

However, it is over longer periods of time that gold outperforms as a measuring stick. In the chart below, the authors show that the quarterly price level during the gold standard tended to deviate much less from its six-year average rate than during the fiat era. Because the general level of prices was more predictable under a gold standard, this provided those who needed to construct long-term debt contracts with a degree of certainty about where prices might be in ten or twenty years that is lacking under a fiat standard. White points out that this may be why 100-year bonds were common in the 1800s, but not so much now.

6-year rolling standard deviations of the U.S. quarterly price level

According to White, the main reason for the long-term stability of gold is the tendency for higher prices to encourage gold miners to increase the supply of metal, thus tamping down on the price, and conversely lower prices to encourage them to reduce production, thus buoying prices. In other words, prices under a gold standard were mean reverting. This mean reversion was generated "impersonally", or automatically, by the market, a superior sort of stability compared to that generated by a fiat standard, which depends on the skills and wherewithal of technocrats employed by the central bank.

Against the Gold Standard: David Glasner

David Glasner is skeptical about the gold standard because he doesn't agree that it mean-reverts fast enough. All of the gold ounces that have ever been mined continue to exist in vaults or under mattresses or around necks. Compared to this extant gold stock, the flow of new gold production is tiny. So if there is an increase in people's demand for gold, it is unlikely that new flows will be able to satisfy it, at least not for some period of time. Likewise, reduced gold production on the part of gold miners won't be able to vacuum up enough of the slack should people suddenly want less of the stuff. In either case, the price of gold will have accommodate shifts in demand by rising or falling quite a bit.

One thing that most monetary economists agree on is that fluctuations in the value of the item used as the standard—gold or fiat money—should not interfere with the "real" economy, say by causing unemployment or gluts of unsold goods. While many prices in an economy are incredibly flexible, like the price of stocks or gold or bitcoin, there are also many prices that are sticky, in particular labour. Under a gold standard, if there is a sudden increase in the demand to hoard gold, then there will be pressure on price of gold to rise. The rise in the gold price means that the general level of prices must fall. Goods and services, after all, are priced in terms of gold-backed notes. But with wages and many other prices locked in place, the response on the part of employers will be to adjust by announcing mass layoffs. Rather than cutting the sticker prices of goods, retailers will suffer though gluts of unsold inventory. This is a recession.

Glasner's favorite example of this occurred during the late 1920s. After WWI had ended, most nations attempted to restore the pre-war gold standard with banknotes once again being redeemable with fixed amounts of gold. But then the Bank of France, France's central bank, began to buy up huge quantities of gold in 1926, driving the gold price up. The U.S. Federal Reserve was unwilling to counterbalance what was viewed as insane purchases by the Bank of France, the result being the worst recession on record, the Great Depression.

What Type of Gold Standard?

Given that various commodity standards have been in place for centuries, why did it take till 1929 for a massive monetary mistake to finally occur? White blames this on large government actors, specifically central banks. In the initial international gold standard that ran from 1880-1914, nations such as Canada, Australia, and the U.S. didn't have central banks. Commercial banks in these nations chose to link their privately-issued banknotes to gold, the goal of these competing banks being to to earn profit rather than enact social policies. So earlier versions of the gold standard functioned far more naturally, without the meddling of large actors who refused to abide by the typical rules of a gold standard. It is for this reasons that White prefers that any return to the gold standard be packaged with an end to central banks, thus precluding episodes like the Great Depression from occurring.

David Glasner remains skeptical. According to Glasner, even the classical gold standard that ran from 1880 to 1914 required management, the Bank of England leaning in such a way as to counterbalance large demands for gold from other central banks and thus preventing anything like the Great Depression from occurring. And even if central banks were to be dismantled under a 21st century version of the gold standard so as to preclude an "insane" Bank of France scenario, there remains the problem of "panic buying" of gold by the public—and the resulting gold-driven recession this would cause.

So Where does that Leave us?

As I hope you can see by a quick exploration of the debate between Larry White and David Glasner, restoration of the gold standard is a complicated issue. I'd encourage readers who are interested to dive a bit deeper into the subject by reading David's posts here and Larry's here.

As for myself, White's work on the 1880-1914 gold standard has been helpful in removing many of the preconceptions I had of the gold standard, no doubt passed off to me by commentators who were never very familiar with the actual data. Nevertheless, I tend to agree with Glasner that under a global gold standard (with no central banks) a sudden spike in the public's demand for gold would impose large costs on the global economy. With citizens of the globe being so connected through the internet and free capital markets, these sorts of episodes might be more common nowadays than they were in the 1800s. I'm not sure the benefits of a gold standard, including exchange rate stability, make up for this risk. Given that Western central banks have done a fairly decent job of keeping inflation under control for the last thirty or so years, I'll give them the benefit of the doubt... for now.

Your Weight in Gold

The traditional phrase “worth your weight in gold” has been used since Roman times, and is a well-known saying signifying that someone or something is very valuable, helpful, or to be treasured.

But taken literally, what ‘value’ would a person be worth if they were worth their own weight in gold?

For a given gold price, the answer not surprisingly depends on the person’s weight, so a more suitable and relevant question might be what value would an average person be worth if they were worth their weight in gold?

Since average weight will vary by gender, a practical calculation would be to run two calculations, one for the average weight of a woman, and the other for the average weight of a man.

Looking at average weight data over regions of the world by male and female yields an average weight for a man of 78.5 kgs (173 lbs), and an average weight for a woman of 69 kgs (152 lbs).

Across the world, human weight data shows the regional averages for both genders from heaviest to lightest run as follows: North America, Oceania, Europe, Latin America, Asia, Africa. Taking simple averages of these regions for men and women, the average global weight for a man is 78.5 kgs (173 lbs), while the average weight for a woman is 69 kgs (152 lbs).

Gold Kilobars

At a gold price of US $1350, a world average weight of 78.5 kgs (173 lbs) for a man would mean that the average adult male would weigh approximately 1993 troy ounces, and be valued at approximately US $ 3.4 million. Note that 1 kilo =  32.1507 troy ounces.

32.1507 troy ounces  * 78.5 kgs = 2524 ozs = US $3.40 million

At the same gold price, a world average weight of 69 kgs (152 lbs) for a woman would mean that the average adult female would weigh approximately 2218  troy ounces, and would be valued at approximately US $3 million.

32.1507 troy ounces  * 69 kgs = 2218 ozs = US $2.99 million

Overall, an average adult across the world weighs 2371 ozs, which at a gold price of US $1350 would be valued at US$3.2 million.

Most people will be familiar with the large gold bars that are stored in central bank gold vaults, such as the gold vaults of the Bank of England in London. These ‘Good Delivery’ gold bars are standard bars in the worldwide wholesale gold market, and although they are variable weight bars, each of these gold bars usually weighs in the region of 400 ozs. Assuming one of these gold bars weighs 400 ozs, then the average adult in our global weight calculation would weigh the equivalent of  5.92 good delivery bars. Let’s call it 6 Good Delivery gold bars, which would be a neat pyramid of 3 * 2 * 1 gold bars.

An average adult weighs the same as 6 large central bank gold bars

Similarly, when measured in terms of gold kilobars, the average adult from our calculation would weigh the equivalent of 74 gold kilobars.

Gold's High Density

Density refers to the amount of mass (weight) in a given volume. Gold has a very high density, 19.3 g/cm3, which is higher than most other metals. As an example, a cubic centimetre of gold will weigh 19.3 grams. Gold’s density is also 19 times higher than water, which is why gold panning works, since the gold will sink to the bottom of the pan and separate from other materials.

Gold's high density also explains why even a 1 ounce gold bar or 1 ounce gold coin will feel heavy when held in the hand, especially for people holding one of these gold bars or gold coin for the first time. It also explains why trying to lift up a 400 oz gold bar, especially with one hand, is a lot more challenging than it first looks.

Gold’s high density also means that a significant amount of gold can be stored in a small area. And because a small amount of gold is valuable, this also means that a very high value holding of gold can be stored in a small area.

This can be referred to as gold’s value dense property, i.e. a small quantity has a high value. This also means that gold can be hidden easily. And that a small amount of gold worth a significant amount can be carried easily, i.e. gold is portable.

If measured in gold kilobars, an average adult would weigh the same as 74 gold kilobars.

Gold's high density makes it difficult to counterfeit, since few other metals can be substituted for gold as their densities are lower. One exception is the metal tungsten, which has a density of about 19.3 g/cm3, similar to gold. While tungsten is sometimes associated with gold bar forgeries, nowadays there are various tests and measurement apparatuses which can determine that a counterfeit bar contains tungsten and not gold.

In comparison to gold, silver has a density of 10.5, which explains why silver is bulkier and takes up more room to store. As the silver price is about 80 times less than the gold price, it also means that a high value holding of silver will require substantially more room to store than a gold holding of the same value. This also explains why silver storage fees in a vault are higher than gold storage fees.

The Gold Standard

Apart from the phrase “your weight in gold”, there are many other well-known idioms associated with gold which also convey gold’s high value and the esteem with which societies and civilizations have held gold in throughout history.

For example, as well as describing an actual gold standard where gold-backed paper currencies in many parts of the world up to the 20th century, the phrase “gold standard” is used metaphorically describe a standard of excellence by which other things are measured.

“Like gold dust” is a popular idiom signifying that something is very rare and of high value, and which is difficult to find because of its rarity value. This expression is derived directly from the fact that gold too is difficult to find, is rare and is of high value.

If a business or enterprise is referred to as “a gold mine”, it is because that business generates substantial profits or cash flow for the owners. Similarly, if someone is “sitting on a gold mine”, it means that they have land or property which is worth a considerable amount.

The terms ‘golden handshake’ and ‘golden parachute’ are now used widely in business to refer to generous departure terms when employees or executives leave a position of employment.

A “gold rush” is often synonymous with the frenzied pursuit of an investment opportunity or new investment sector, such as a gold rush on Wall Street, or the dot-com gold rush. Finally, to “strike gold’ is to find success or wealth through a deliberate endeavor or sometimes through luck.

Whatever the expression, the one thing that these well-known phrases have in common is that they allude to gold's high value and rarity, and are immediately accepted and understood when used in the English language.

Bitcoin backwardation, gold contango

People often refer to bitcoin as digital gold because of the similarities between the two assets. One big difference between gold and bitcoin is currently playing out in their respective futures markets. Since bitcoin futures were introduced last December by the CBOE, futures prices have often been inverted, or in backwardation. This sort of phenomenon rarely happens in gold markets, which trade normally, or in contango. Let's explore why inversion seems to be relatively common with bitcoin and whether this will continue to be the case in the future.

Backwardation or inversion is when future prices for a commodity lie below its current price. For instance, at lunch-time on January 16 (EST), when the current price for bitcoin was $12,170 on the Gemini bitcoin exchange, the March 2018 contract on the CBOE futures exchange was being bid at $12,000, a discount-to-spot of $170 or 1.4%.

At that very same point in time on January 16, gold's spot price was at $1334 whereas the March futures contract was trading at $1336.90, a premium-to-spot of $2.90 or 0.2%. This is contango, or a normal-yielding market. I’ve illustrated both markets below.

A comparison of the spot prices of bitcoin and gold to their futures prices on Jan 16, 2018

In theory, the future price of a durable and easily storable commodity—say like gold, silver, and bitcoin—should always lie above the current price, or in contango. This is because storables incur holding costs, and a higher futures price is the market's way of paying for those costs.

Contango as the fee for hoarding gold

To see how this works, let's trek through an example. Say that you are jeweler. It is January and gold is trading at $1300/ounce, which you think is a fantastically cheap price. However, you can't take possession of the gold right now because you have no space for it—your vault is already full. Three months from now, at the end of March, your existing inventory will have run down and you'll have room for the stuff. Can you lock in today's price while having someone else hold the metal for you until then? Say you strike a deal with a counterparty. They will buy the gold at today's price of $1300 and store it in their vaults on your behalf, only delivering the stuff to you at the end of March.

Your counterparty won't provide this service for free, they have to be compensated for the burdens of carrying the product for you. These costs include the interest payments on the loan required to buy the gold, vaulting fees, and insurance. So if gold is currently trading at $1300, and the total cost of carrying it till March is $10/ounce, then the contract you strike with the counterparty will be priced at $1310. Of this amount, $1300 allows the counterparty to pay off the face value of the loan they originally took out to buy an ounce of the yellow metal, the remaining $10 covers them for the cost of storing it, insuring it, and paying interest.

With the futures contract trading at $1310 and the current price at $1300, we say that the market is in contango. Contango is the fee—in this case $10—that buyers of gold-in-the-future pay to counterparties in order to induce these counterparties to hoard the metal on their behalf for a period of time.

As the chart below shows, gold has spent most of the last ten years in contango. The spread, or difference between the spot price and the futures price (from 2 months out to 20 months out) almost always lies above 0%.


There have been two exceptions on the two and four-month spread (the red and pink lines), one in 2014 and another in 2016. I described the 2014 episode here. But  inversions like these will only ever be fleeting, the dominant pattern in gold markets being a normal market characterized by futures prices trading above spot prices. (If you want to get into the specifics of the relationship between gold spot and future prices, Koos Jansen has written an in depth treatment here).

Backwardation as a negative fee

Compared to other commodities, gold compresses a lot of value into a small amount of space. Which means it is relatively cheap to store. For instance, ten bushels of wheat—which is worth around $40—would require an entire closet as storage space. To store $40 worth of value in the form of gold, a gram would be sufficient for the task. If we look at the data, with gold trading at $1334 and the March contract was $1336.90, the cost of storing gold in a vault, insuring it, and financing it until March is just $2.90.

Bitcoin's $170 backwardation on January 16 meant the opposite. Counterparties who were offering to store bitcoin through to March were so desperate to provide this service that they were willing to pay a fee to do it rather than charging a fee. That anyone would take on the task of storing bitcoins for free, let alone paying to take on the burden, is especially odd given that the cost of securely "hodling" bitcoin is probably not that much less than storing gold. Commercial storage of bitcoin involves depositing private keys in vaults, much like how people keep the yellow metal safe. Consider this recent Times article that describes how the Winklevoss twins, who own a big bitcoin stake, have cut up printouts of their keys and scattered the pieces in safes all around the U.S., so if one safe is broken into the thief would still lack the full key. It is difficult to find insurers that offer bitcoin insurance products, this rarity presumably translating into fairly high insurance costs. And like gold, the financing necessary for purchasing bitcoin incurs interest expenses. So in theory, the price of bitcoin in March should permanently lies a hundred or so dollars above the spot price in order to cover these carrying costs, not below the spot price.

There are two theories for why bitcoin might be spending a disproportionate amount of time in backwardation.

1. Undeveloped market for short-selling

Imagine that a crowd of large Wall Street traders suddenly want to sell bitcoins short, but they can't because their stringent investment mandates prohibit physical bitcoin positions. So they express their short bias by selling CBOE futures contracts which—because they are listed on a legitimate exchange—do not contravene these traders' mandates. Bitcoin futures, which had been in contango, are abruptly driven into backwardation, a discount-to-spot.

Normally an arbitrageur would correct this discrepancy. If an arbitrageur is holding some bitcoins, the $170 discount means that the market is rewarding her not to store those bitcoins. She purchases futures at $12,000 and sells some of her bitcoins at $12,170, earning a risk free $170 profit. As long as this backwardation continues, she can keep earning profits by selling her bitcoins and buying futures until she has run out of bitcoins to sell. At which point she will try to borrow bitcoins from other people and sell them. The combined effect of her constant selling of physical bitcoins and futures buying should eventually drive the market price from its inverted state back into contango.

But if our arbitrageur can't borrow enough bitcoin to counterbalance Wall Street's demand to sell bitcoin short, say because lending markets are still undeveloped, then there is no way for her to fix the anomaly. Markets are stuck in backwardation. Both Kid Dynamite and Jayanth Varma have posts explaining the difficulties of arbitraging bitcoin in more detail.

An undeveloped market for borrowing and lending bitcoins is not innate to bitcoin. Presumably if bitcoin markets develop, these sorts of inefficiencies will be addressed and bitcoin—like gold—will trade more normally. That being said, bitcoin does have one innate property that can lead to backwardation: forks.

2. The omnipresent threat of forks

The second explanation for bitcoin backwardation is the ever-present threat of contentious forks.

To help understand how forks affect bitcoin futures prices let's first look at how S&P 500 futures work, because there is an important similarity between the two assets. While storing gold is a drag, there is an upside to storing the S&P 500. The person who does the storing gets to enjoy dividend payments! As long as dividend payments are higher than the cost of paying interest on the loan originally used to buy the S&P 500 (there is no vaulting or insurance costs on equities), then it is possible to come out a net winner by carrying the S&P 500 through time.

Over the last ten years or so, S&P 500 futures have generally been inverted, with futures prices trading below spot prices. The reason for this is that short-term interest rates have generally been lower than dividend yields. Those who store equities through time on behalf of buyers of S&P 500 futures accept a discount-to-spot because the dividends they earn make up for it.

Although bitcoin doesn't pay dividends, it does throw off an unusual set of rewards—forks. When a fork occurs, anyone who held x bitcoins now gets x newcoins in addition to their existing x bitcoins. Forks occur because participants in the Bitcoin network disagree about certain technical features of the code that runs the network. One set of actors continues to use the original code while the other modifies it, this modification leading to the creation of newcoins.

A futures market like the CBOE must define what sort of bitcoins are sufficient to settle a bitcoin futures contract. In the case of a chain split, this gets complicated. Is someone who owns a futures contract entitled to get just 1 bitcoin from the seller of a futures contract, or are the entitled to 1 bitcoin and 1 newcoin? The short answer is that the CBOE defines a 'bitcoin' in such a way that it does not include newcoin. So in the event of a fork, a futures seller who is storing a bitcoin in order to deliver it to a futures buyer gets to keep the newcoins for free.

Any newcoin that is created will hive off or steal a chunk of bitcoin's original value—after all, you can't get something for nothing. Thus, in the event of a fork, those who have bought a futures contract are now entitled to an inferior bitcoin, one that has had the value of a newcoin ripped out of it. Conversely, anyone who has been storing bitcoin on behalf of someone else no longer needs to deliver the full bitcoin when the futures contract expires; the terms of the futures contract stipulate that they get to retain a chunk of the original bitcoin in the form of a newcoin.

So to protect themselves against the potential for lost newcoins, those buying bitcoin futures will always demand a lower futures price than they would otherwise demand in a world in which bitcoin could not be forked. If the threat of a fork is deemed large enough, bitcoin futures will actually go into backwardation.

Think of it this way. Backwardation means that those storing bitcoin on behalf of others will not only do so for free, but will even pay to have the task thrust on them. This may sound odd, but if part of the calculus of storing bitcoins is that all free and valuable newcoins can be retained by the person who does the storing, then it makes sense that people will eagerly pay a fee for the right to store someone else's bitcoins.

An example: backwardation and the failed Segwit2x fork

We can see an example of a fork-induced backwardation happening back in the fall of 2017, when a proposed change to Bitcoin's source code called Segwit2x was on the verge of leading to the creation of a newcoin. Bitmex, a fledgling futures exchange, stressed to its users at the time that its December 2017 bitcoin futures contract would not include the Segwit2x newcoin.

Through late October and early November, Bitmex's December futures contract fell to an ever deeper discount relative to the spot price of bitcoin. You can see this in the chart below. This inversion occurred in conjunction with growing odds that the upcoming newcoin's debut would be a success and that it would 'steal' quite a bit of value from each already-existing bitcoin. A futures buyer who wanted to take delivery of one bitcoin in December 2017 needed to adjust for the fact that this bitcoin could have a large chunk ripped out of it by Segwit2x. Driving Bitmex's futures contract into backwardation was the market's way of making this adjustment.

The Segwit2x fork drove bitcoin into deep backwardation

The Segwit2x fork was abruptly cancelled on November 8, and Bitmex's December 2017 contracts immediately reverted to contango. Since the cancellation of Segwit2x meant that existing bitcoins would not have any value sucked out of them, there was no need for futures buyers to protect themselves.

To sum up...

Because bitcoin is a young and inefficient market, borrowing bitcoins in size may be challenging. And that may explain at least some of the observed backwardation in bitcoin futures prices. But even if the market matures, Bitcoin will always be subject to the threat of contentious forks. This permanent threat gives rise to a set of forces that will always pressure the future price of bitcoin down relative to spot price. When the odds of a fork are low, these forces will not be sufficient to drive futures prices into full backwardation—they will simply push them down until they are relatively flat relative to the current price. But as the odds of a fork grow, all-out backwardation will be the result.

As for gold, there is no way it can be forked. Thus gold futures should spend far more time in contango than bitcoin futures should.

Why does money inflate?

People who live in developed nations have grown used to inflation of around 2% a year over the last few decades. Why do prices generally rise by that amount? What drives the purchasing power of money in these countries? Why can’t prices stay constant year-over-year rather than increasing?

To help answer some of these questions, let's go far back in time. We'll divide the last one thousand or so years into three monetary eras: the silver coin period, metal-backed notes, and fiat money. How would the nature of inflation have changed as you passed from one era into the next?

The medieval coin era

Silver coins were the chief medium of exchange in the first five or six centuries of the last millennium. Even though coins were composed of scarce metal, inflation was a fairly common occurrence in medieval times. Coins were not perfectly durable. They suffered from wear and tear, both from sweaty hands and as they came into contact with other coins while in a pocket or purse. Since the value of a medieval coin was ultimately determined by the amount of silver in it, the purchasing power of the coinage would naturally decline each year as it shed silver. So rising prices, or inflation, was inherent to medieval coin systems.

The wear and tear of the coinage would often be accompanied by deliberate attempts on the part of the public to remove silver from coins. This came in the form of clipping, in which people would cut small bits of silver from the coin's edge, and sweating, in which a bag of coins was shaken, the dislodged bits collecting at the bottom of the bag. Clipping and sweating were illegal and punishable by death during medieval times, but that didn't stop people from doing it.

Clippings from old coins

To make matters worse, from time to time kings and queens would adopt a policy of aggressively reducing the silver content of coins in order to raise revenues, mostly to fight wars. In medieval times, mints operated differently than they do now. Anyone could bring raw silver to the mint to be turned into coins, paying a small minting fee to the monarch. By reducing the silver content of the coinage, the monarch incentivized everyone to quickly bring in their old silver coins to be coined into new coins. After all, people could get more coins for each ounce of silver they owned, thus allowing them to pay off more debts than before. This would create a one-time spike in mint throughput, thereby boosting royal revenues from fees.

A Thousand Years of Prices: UK Consumer Price index

One of history's most aggressive medieval debasers was Henry VIII, who announced ten debasements between 1542 and 1551, each in the region of 30-40%. These diminutions were so successful in driving silver to the royal mints that Henry had to erect six new ones just to meet demand. Between 1541 and 1556, the English consumer price index rose by 123%. It's possible to see this spike in the chart above.

Not all kings and queens debased the currency. Every once in a while one of them would try to restore the standard by announcing a general recoinage. All citizens were obliged to bring in their coins to the mint where they would be weighed and then melted down into new coins. The new coins would have a restored amount of silver in them, thus undoing some of the wear-and-tear-induced inflation of previous years.

Finally, advances in silver mining technology and new discoveries had a major role to play in determining the level of medieval prices. If the supply of silver suddenly increased while demand remained unchanged, the price of silver would decline relative to that of other goods. And since coins were themselves composed of silver, their purchasing power would decline. Or, put differently, inflation would occur as all prices in the economy rose. Deflation, a fall in prices, was just as likely to occur under a silver coin standard. If the population was growing with the supply of silver failing to keep up, then the price of silver would have to rise, or a general deflation would set in.

To sum up, inflationary episodes during the medieval silver coin area could be explained by a complex combination of natural wear and tear of coins, debasement by kings and queens counterbalanced by the odd recoinage designed to restore the standard, and changes in the fundamentals of the underlying silver market. The strongest inflations occurred when all these forces were aligned. For instance, if a new drilling technique suddenly opened up deeper silver deposits for exploitation, and the monarch was simultaneously debasing the standard to help fund wars, then—combined with natural wear and tear—the result would be a rapidly increasing prices.

The metal-backed banknote era

Bankers soon learnt how to make money out of paper. This would begin to change the complexion of inflation.

As long as bankers maintained full convertibility of their banknotes into the underlying commodity, then the banknotes they issued could not have any direct influence on the economy-wide price level.  Alterations to the quality and nature of the coins themselves, as well as deeper changes in the underlying silver market, still dictated inflation, as they did in the coin era.

It's worth investigating this point further. Inflation occurs when people have too much money in their wallets relative to demand. With nowhere to go, money becomes a hot potato. Merchant A doesn't want to hold an extra $100 bill or silver coin in their wallet, so he spends it at Merchant B's store, who doesn't want it so she spends it at person C's store, and on and on, each trade in this chain pushing up prices ever so much. The hot potato process only comes to a halt when all prices in the economy have been driven high enough that the $100 bill or silver coin is no longer unwanted, and it comes to a rest.

By providing an alternative exit for banknotes, convertibility short-circuits this hot potato effect. Say a banker had lent too many banknotes into circulation relative to demand. Rather than boomeranging through the economy hot potato-like, an unwanted $100 bill quickly returns to the issuing bank for redemption, long before it has exerted any influence on the price level.

Although they had no direct influence on the general level of prices, banknotes would have had an indirect influence on prices. As paper money gradually became more popular relative to coins, the demand for silver would have declined relative to the supply, and this would have put gentle downward pressure on the silver price and conversely upward pressure on the economy-wide price level. Second, as people opted to use paper money to meet their spending requirements, coins would have slowly disappeared into vaults. Since this mean that coins circulated less, the inflation that had historically occurred thanks to wear & tear, clipping, and sweating would have receded.

The real novelty in the age of metal-backed bank notes was when convertibility was temporarily suspended. During these periods, bankers and the banknotes they issued could have a direct influence on the economy-wide price level. With the traditional exit into specie or coin being severed, any banknote issued in excess of public demand would act like a hot potato. Rather than returning to their issuer, they caromed through the economy, pushing prices higher.

While there were a number of early paper money experiments, the most well-known include the Swedish experience under an inconvertible paper standard from 1745 to 1776, the British suspension of pound convertibility from 1797 to 1821, and the U.S. Greenback era from 1861 to 1878. Each of these periods of inconvertibility was accompanied by high inflation and coincided with major wars. For instance, in the mid-1700s the Swedes had entered into several conflicts including the Seven Years War, while by the late 1700s the British were on the verge of encountering Napoleon. In the U.S., greenbacks were used by the Union to finance their war against the Confederates.

A US $1 greenback note from 1862

Had banknotes remained redeemable during these conflicts, it would have been impossible for governments to issue large amounts of them—they would have quickly returned to the issuer. By severing the window, many more banknotes could be put into circulation than would have otherwise been the case.

All three suspensions were only temporary as they ended with a return to specie convertibility. It was only in the 20th century that the first permanently-inconvertible standards emerged.

The fiat money era

In 1971 President Nixon removed the ability of foreigner governments to convert U.S. dollars into gold. The world was now on a permanent fiat standard.

Under both coin-based monetary systems and fully-convertible paper standards, the monetary authorities had only a little bit of control over inflation. The key influences over the price level—wear and tear, clipping and sweating, and new precious metals discoveries—were things that happened to the currency, the monetary authority having little say in the matter. When they did exercise control, it was only through policies of coin debasement or attempts to restore the standard.

Under today's permanent fiat system, these external influences have all but disappeared. Instead of being foisted on the economy by chance, the economy's inflation rate is now created by the monetary authority.  Those who are in charge can choose to have the currency gain purchasing power over time (i.e. deflation), stay constant, or lose purchasing power over time (i.e. inflation).

In most western democracies, the monetary authorities have chosen a 1-3% inflation rate. This may seem odd, given that a constant price level is attainable. One drawback of perpetual 1-3% inflation is that people must constantly face losses on their holdings of coins and banknotes. This induces wasteful behaviour. For instance, people may choose to hold less cash than they would otherwise prefer. And they will have to constantly make trips to the bank and back to deposit banknotes in order to earn interest (this is what economists refer to as shoe leather costs). If inflation was 0%, or even -1 to -2%, the public would no longer have to worry about perpetual losses from cash and could choose to hold comfortable amounts of the stuff.

While monetary authorities understand the drawbacks of 1-3% inflation, they still choose it as a target because they see a much bigger threat in the form of sticky wages. In the simplest model of an economy, when a shock hits and demand suddenly disappears, prices fall until buyers are once again drawn back into the market. But if some of these prices are sticky, in particular the wage rate, then this downward trek in prices can never occur. Rather than reducing everyone's salary, employers will be forced to fire workers. General unemployment and gluts of unsold inventory—or a recession—are the result.

Central bankers believe they can offset some of these unpleasant effects. While a $20 per hour wage rate may be so sticky that it can’t adjust in the face of an economic shock, an inflation rate of 1-3% means that even though the nominal value of that wage stays constant next year, its real value will have adjusted down to ~$19.60. So in the event of a shock to the economy, a central bank that targets an inflation rate of 1-3% provides the missing flexibility to wage rates, and thus promotes a quicker readjustment period.

The second reason for adopting an inflation target of 1-3% is that at these levels, short-term interest rates have typically ranged between 3-6%. After all, lenders need to make a profit, and will demand a sufficiently positive interest rate to compensate for losses from inflation. The tool that modern central bankers use to guide the price level is the overnight interest rate on balances maintained by commercial banks at the central bank. This tool becomes useless when it falls much below 0%, the effective lower bound to interest rates. Once interest rates are reduced to around -0.75%, banknotes (which yields 0%) begins to look quite attractive as an asset. Reduce interest rates a little bit more and a mass exit from bank deposits into cash will begin, the banking system imploding in the process. So by targeting an inflation rate of 1-3%, central bankers are attempting to build a big enough cushion into interest rates so that they can be sure that their main monetary policy tool has little chance of becoming useless.

And that's why people in Western nations experience a 1-3% increase in prices each year.

What is in store for the future?

So if you had lived through the last 1000 years you'd have experienced a number of different monetary regimes, the price level dynamics different in each one. Even under commodity standards, inflation was a common occurrence. And even on a fiat standard, deflation is an entirely possible phenomenon.

In closing, will the current 1-3% inflation target that has been adopted by most Western monetary authorities ever change? In certain quarters, there is talk of central banks increasing their inflation targets to 4%- 5%. Over the last few years, interest rates have fallen close to—and even in some cases underneath—the 0% bound, muting the power of the central bank's interest lever. If inflation was 4%, say many central bankers, then short-term rates would be much higher (say 6-7%), thus building in an even bigger cushion for subsequent interest rate reductions come the next crisis.

Alternatively, central bankers might one day decide to target an inflation rate of 0%. This would mean that short-term rates would be very low, leaving little-to-no cushion for further policy rate reductions when the next crisis hits. But there are several ways to guide interest rates far below 0%. Some economists talk of banning cash (especially high denomination notes like the ones below), for instance, or introducing a digital alternative on which a negative interest rate can be imposed. These measures would allow a central bank to reduce interest rates to -3% or -4% during a crisis without having to fret over an exodus out of bank deposits into banknotes. During these episodes with deeply negative rates, the public  would flee into stocks or gold or cryptocurrencies—but this would be a sign that the desired hot potato effect was working. Having bought plenty of room to reduce interest rates into negative territory when a shock hits, central bankers could safely target 0% inflation rather than 1-3% inflation.

Singapore's S$10,000, one of the world's largest value banknotes

Finally, might we ever see inflation in the teens like we did in the 1970s? Western central bankers have exercised a large degree of independence from their political masters in the executive branch of the government over the last several decades. This has allowed them to maintain careful control over the price level. However, if some unforeseen event were to occur that led Western governments to require huge amounts of financing—say another world war—then governments may try to re-exert control over monetary policy. If so, keeping inflation under control could cease to be an important goal of the monetary authority, and the high inflation of the 1970s might return.

The 5 Largest Gold Nuggets that Still Exist

Throughout gold rush and gold mining history, the discovery of a large gold nugget is a phenomenon which always causes excitement throughout a mining community as well as capturing the wider public's imagination. It has probably something to do with so much gold being found at the same time, often with relative ease.

Gold nuggets can be found in alluvial deposits (sediments formed by water movement) or in other placer deposits (formed by other movement), but gold nuggets can also be found in or close to primary gold deposits, for example gold lodes or veins which have been exposed by the weather. "Gold nuggets" can also technically be extracted from hard rock gold deposits as long as the surrounding rock can be removed.

There are a number of gold nuggets which claim to be the world's largest. Obviously, not all of these claims can be true. There are also a number of "largest gold nuggets" lists which confusingly mix historical nuggets which no longer exist alongside nuggets which still exist.

We think a list of gold nuggets which still exist is more accurate, since many historical nuggets are now just legends and have long since been melted down into gold bars or gold coins. Therefore, the following list, based on research to the best of our abilities, profiles the largest 'named' gold nuggets which are still in one piece, all of which are famous, all of which are on display, and all of which can be visited by the public.

1. Pepita Canaã,  Brazil

The world’s largest surviving gold nugget is the Pepita Canaã (Canaan Nugget) which was found by miner Júlio de Deus Filho in the Serra Pelada ('Naked Mountain') gold mining region of Brazilian state of Pará in 1983.

The Pepita Canaã gold nugget has a gross weight of 60.82 kgs and contains 52.33 kgs of gold, or 1682 troy ounces of gold. The "Canaan" gold nugget was purchased by the Banco Central do Brazil in 1984, and is now on display in the "Gold Room" of the central bank’s money museum (Museu de Valores do Banco Central in Brazil) in Brazil’s federal capital Brasilia.

Notably, the source nugget from which the Pepita Canaã nugget came was actually larger, but it split into several pieces while being removed from the ground.

"Pepita Canaã" - The largest surviving gold nugget, on display at the Brazilian central bank headquarters, Brasilia

In the early 1980s, Serra Pelada became known as one of the world's most notorious gold mining areas when over 100,000 freelance miners flocked there to engage in open air gold mining excavations in vast, dangerous, and crowded conditions. The Serra Pelada has essentially been closed since the late 1980s and gold mining is no longer possible due to flooding and government prohibitions. However, Brazil is still a significant gold producer, with gold production output in 2016 totalling 80 tonnes, according to the US Geological Survey (USGS).

Serra Pelada gold rush, Para, Brazil, 1980s

2. The Great Triangle, Russia

The world’s second largest surviving gold nugget is the “Great Triangle”. This gold nugget was found in the Miass area of the Russian Urals mountains in 1842 by Nikofor Syutkin. It has a gross weight of 36.2 kgs and a gold assay of 91%, meaning that it has a fine gold content of 32.94 kgs, or 1059 troy ounces of gold. The "Great Triangle" has dimensions of 31 cms * 27.5 cms * 8 cms, and as the name suggests,  it is triangular in shape. When found, it was dug up from a depth of about 3.5 metres.

The Great Triangle gold nugget on display at the Kremlin in Moscow, Russia

The Great Triangle gold nugget is owned by the Russian State, and through the Gokhran Fund (State Fund for Precious Stones and Precious Metals), it is currently on display in the 'Diamond Fund' collection in the Kremlin in Moscow. The Diamond Fund is an extensive  permanent exhibition of the Russian state's crown jewels, precious stones and gold and platinum nuggets.

While the Urals was one of Russia's first gold mining areas, today, there are extensive gold mining operations in many areas of the Russian Federation, particularly in the East of the country. Russia is currently the world's 3rd largest gold producer, with mining production output of 250 tonnes of gold in 2016.

3. Hand of Faith, Australia

The "Hand of Faith" is a 27.66 kgs gold nugget found by in the area of Kingower, Victoria, Australia in 1980 by a local, Kevin Hillier. This gold nugget has the distinction of being the largest gold nugget ever found using a metal detector. It contains 875 troy ounces of gold, and has dimensions of 47 cms * 20 cms * 9 cms.

The "Hand of Faith" nugget was purchased by the Golden Nugget Casino in Las Vegas, Nevada, USA, and is currently on display in the casino lobby on East Fremont Street in the old downtown center of Las Vegas.

Hand of Faith gold nugget on display in the Golden Nugget casino, Las Vegas

The Golden Nugget Casino claims on its website that the "Hand of Faith" nugget is the world's largest surviving gold nugget, but this is clearly not the case given the existence of other larger gold nuggets such as Brazil's Pepita Canaã and Russia's Great Triangle nuggets.

4. Normandy Nugget, Australia

The "Normandy Nugget” is the name given to a 25.5 kgs (820 ozs) gold nugget found is 1995 in the important gold mining centre of Kalgoorie, Western Australia. Assay analysis shows the Normandy Nugget to have a gold purity of between 80%  and 90% .

The Normandy Nugget was purchased from the finder in 2000 by Normandy Mining, which is now part of Newmont Gold Corporation, and the nugget is currently on display in the museum of the Perth Mint based on a long-term agreement with Newmont.

The "Normandy Nugget", on display at the Perth Mint, Western Australia

Western Australia is the country's most important gold mining region and has been since the late 1880s when gold was discovered in a number of areas including  Kalgoorie. Today, Kalgoorie is home to the Super-pit, one of Australia's largest open-cast gold mines.

According to the US Geological Survey, Australia is the world's second largest gold producer, with gold mine output of 270 tonnes in 2016.

5. Ironstone’s “Crown Jewel”, California

Ironstone’s “Crown Jewel” gold nugget is a single piece of crystalline leaf gold found in California in December 1992 by Sonora Mining Company. The gold was found embedded in quartz rock, however through a cleaning process involving hydrofluoric acid, most of the quartz was removed to reveal a single mass of gold weighing 44 troy pounds (16.4 kgs).

Ironstone Crown Jewel, Crystalline Leaf Gold

The Ironstone “nugget” is now on display at a heritage museum in Ironstone Vineyards in California, and is sometimes referred to as the “Kautz Crystalline Gold Leaf Specimen” in reference to John Kautz, owner of Ironstone Vineyards.

Gold and California have been interlinked since the famous northern California gold rush of the late 1840s - early 1850s. The US is still a major gold producer, and in 2016 produced an estimated 209 tonnes of gold according to US Geological Surveys (USGS), putting it in fourth place behind, Chine, Australia and Russia. Nowadays however, Nevada and Alaska are the US' two primary gold producing states, although there are still gold mining operations in California such as New Gold's Mesquite gold mine.


There are actually a number of gold nuggets from Brazil's Serra Pelada region on display in the Brazilian central bank's museum. A list of these gold nuggets can be seen here. Three of these additional gold nuggets are listed with gold content weights of 30.56 kgs, 29.89 kgs, and 28.2 kgs, respectively, which would make them larger than both the 'Hand of Faith' nugget and the 'Normandy Nugget'. However, none of these other Brazilian gold nuggets has received fame in the same way as the Pepita Canaã nugget, and the Banco Central do Brasil seems to prefer to display them anonymously. Technically these other Brazilian gold nuggets from Serra Pelada would push both the Australian nuggets and the Ironstone nugget down the list.

Two historic gold nuggets found in Victoria, Australia in the 1800s were both larger than the Brazilian Pepita Canaã nugget, and both at times still appear in "world's largest gold nugget lists". The first of these was "The Welcome" nugget found in Ballarat in 1858 during the Victoria gold rush. This gold nugget weighed approximately 69.98 kgs. However, "The Welcome" was subsequently shipped to England and melted down by the Royal Mint in 1859 to fabricate Gold Sovereign coins. Replicas of "The Welcome" can still be seen today in a number of Australian museums. 

The 2nd large historical gold nugget found in Australia was the  “Welcome Stranger” which was discovered in Victoria in 1869. Reports as to its weight vary but are consistently above 70 kgs of gold content. Within a few days of it being found, the Welcome Stranger was cut up, melted down into ingots, and shipped to the Bank of England via Melbourne. However, a replica of the Welcome Stranger nugget can still be seen today at the City Museum in Melbourne.

Gold for Christmas – Gold’s Importance in Religion

Gold and Religion have always been symbolically linked in countless civilizations from antiquity to the present day. From religious artwork to religious symbolism, gold is unique among metals in being central to many of the world’s religions, and gold has long been associated with the divine sphere.

Gold In Christianity

During the festive season of Christmas, it is apt therefore to reflect on the importance of gold in religion. In the Christian tradition, gold appears in the story of Christmas and its association with the birth of Christ in Bethlehem. According to the Bible, when Jesus Christ was born to Bethlehem, a group of wise men (Magi) made a journey from the East to celebrate and worship the birth, bringing with them gifts of gold, frankincense and myrrh. The gift of gold was a symbol of wealth and power, but also, according to religious scholars, a symbol of Christ’s kingship on Earth.

Nativity Scene in Bethlehem with Magi bearing gifts including Gold

In fact, throughout the Bible, gold is frequently mentioned, from the first book (Genesis) to the last book (Revelations), and everywhere in between. For example, the Book of Genesis refers to 4 rivers flowing out of the Garden of Eden, one of which, the Pishon, “flows around the whole land of Havilah, where there is gold.” (Genesis 2:10 and 2:11). And in the Book of Revelations, a description of a new Jerusalem describes the street of the city was pure gold, as it were transparent glass” (Revelation 21:21).

While gold is attributed considerable value in the Bible and is frequently referred to as the most valuable substance on earth and the greatest form of wealth, it is also juxtaposed with spiritual value, so as to illustrate that spiritual value is beyond even the substantial material value of gold. For example, Psalm 119:127 says that: “Therefore I love your commandments more than gold, yes, more than fine gold!”

So it's not surprising then that gold plays an important role in the Christian religion. In Christianity, gold has been extensively used to decorate churches, cathedrals and chapels, to fashion crosses, chalices and altar furniture, and as gold leaf to gild statues, adorn manuscripts, and to represent halos and divine light in Middle Age and Renaissance period art. Gold is also found on the gilded domes of some Christian Orthodox churches in Eastern Europe.

Gold's Unique Role in Religions

But what does gold possess that gives it universal appeal to all the world’s major religions, and to ancient religious traditions throughout antiquity, such as in Ancient Egypt? And why in the hierarchy of metals, does gold take precedence over other all metals?

The reasons are many and varied. With its unique glow and yellow shine, gold is symbolic of the colour of the sun, and in religious art gold is associated with daylight and the energy of the divine.

St Peter's Basilica, Papal Altar, Vatican City, Rome

Since it is relatively rare, indestructible and doesn't decay, the use of gold in religion conveys a preciousness and immortality that other metals do not convey. And since gold is highly malleable and capable of being formed into many shapes and objects, gold naturally lends itself to artistic works and decorative ornamentation. That is why gold is found as decoration in religious places of worship such as churches and temples and in religious artifacts and decorating sacred scriptures.

And because religions evolve and changes and are influenced by previous religious traditions, the special status of gold in a religious context has persisted down through history from one religion to another.

Replica of the Ark of the Covenant

The Biblical Ark of the Covenant which was once stored in Jerusalem was said to be fully gilded in gold. And in Judaism, the symbolic menorah or lampstand is also often crafted from gold. Some of the Scriptures and Writings of Judaism also overlap with various texts of the Old Testament in the Christian Bible, so the references to gold in Hebrew Scriptures and Writings are also to some extent the same references to gold that are found in the Old Testament.

Gold In Islam

Gold has long had an intricate connection with Islamic culture with its role being shaped by the need to comply with Islamic teachings. Since usury is forbidden in Islam, a form of money, such as gold, that does not involve interest and usury evolved in the shape of the historical gold dinar coin as well as the Islamic silver dirham. This historical gold dinar in Islam was first produced in the seventh century. According to Islamic law, the dinar had to be made from 22k gold and have a weight of 4.25 grams. Since the dinar is gold, its weight determines its value, and it acted as a stable medium of exchange and not a paper promise, again complying with the word of the Quran.

In modern times, there has even been a revival of interest in the concept of this historic gold dinar in Malaysia. This has led to a number of initiatives where modern gold dinars were launched by Malaysia’s Kelantan and Perak states in 2010 and 2011. One side of the Perak gold dinar even features the design of the original gold dinar from the late seventh century AD. Modern gold dinars have also been issued by the Indonesian Islamic Mint Nusantara.

Ancient Gold Dinar, Islamic Money 

Under Shari’ah law, gold is also one of 6 Ribawi goods (along with silver, wheat, barley, salt, and dates) which must be sold based on their weight and measurement, so as to ensure transaction equality among trading parties.  Speculation is also prohibited in Ribawi goods.

With the growth and proliferation of modern gold-based investment assets, there has been a need to update Sharu’ah guidance on  the type of transactions in gold which meet Shari’ah compliance. This was achieved in December 2016, when the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) issued a Shari’ah Standard on Gold which clarified Shari’ah complaint forms of gold that can be traded or used in gold-backed investment products.

Gold is also important in Islam as decoration and adornment. While Islam generally prohibits men from wearing gold (but not women), Islamic architecture also at times makes abundance use of gold in areas such as mosque decoration, for example, the Sheikh Zayed Grand Mosque in Abu Dhabi.

Gold in Hinduism

Gold is central to the Hindu religion and culture which is practised throughout India. Some major Hindu deities are associated with gold such as Brahma, the Hindu God of Creation who was born from a cosmic golden egg of creation. Gold is also symbolic of Lakshmi, the Hindu Goddess of wealth, prosperity and good fortune.

Therefore, gold is auspicious in Hinduism, which also explains why it is given as gifts for weddings and other special occasions, and gifted during festivals such as Dhanteras. For the same reason, gold is gifted in Hindu ceremonies, and devotees make regular donations and offerings of gold to Indian temples.

Sree Padmanabhaswamy Temple, India

The Sree Padmanabhaswamy Temple in Kerala stores what is now considered the largest gold hoard in the world. This hoard was confirmed in 2011, when some of the subterranean vaults of this temple were opened by order of the Supreme Court of India. The Padmanabhaswamy Temple’s treasure, which contains gold ornaments, gold statues, huge amounts of gold coins, and even a gold throne, has been accumulated over thousands of years from temple donations including donations from former Indian dynasties and kings.

Some temples in India are even covered in gold, such as the golden temple of Sripuram in Tamil Nadu which is covered in 1500 kgs of pure gold, and the Sri Harmandir Sahib Golden Temple in Punjab - an important pilgrimage destination for Sikhs - whose sanctum is covered in gold foil.

Gold in Buddhism

Gold is also central to and venerated in Buddhism. The colour gold in Buddhism is associated with the golden rays of the sun, and of enlightenment.

Temple of the Golden Buddha: Wat Traimit, Bangkok

Buddhist culture features various famous solid gold Buddha statues, the largest of which is the Golden Buddha in the Temple of Wat Traimit in Bangkok, Thailand, which weighs 5.5 tonnes, and is 2 meters high. Buddhist statues in Tibetan regions are usually also painted with gold. In 2013, the former king of Thailand even donated nearly 300 kgs of gold to decorate the spire of the Buddhist Mahabodhi temple in Bodh Gaya, India.Gold is also used to decorate the famous Zen Buddhist Temple of the Golden Pavilion in Kyoto, which is covered in pure gold leaf.

Gifting of Gold for the Holiday Season

As gold is rare and precious, it has always and will always make an impressive gift which will be cherished and remembered. With its intrinsic connection to Christmas and the Christian tradition, as well as deep association to all the world's other major religions, the gift of gold is also a thoughtful one that transcends even the material value of the actual gold content. It may be of interest then to know of a selection of bullion gold bars and bullion gold coins that are ideal for gifting, and that will create a lasting impression for those that receive them.

PAMP is one of the world’s most prestigious and most sought-after names for high quality gold bars. Fabricated in Switzerland, PAMP’s 99.99% pure gold bars make ideal gifts, such as a 100 gram minted gold bar presented in a stylized and secure presentation card, or the more traditional and rugged 100 gram cast gold bar, each of which is stamped on the front with its own serial number. PAMP also makes a whole range of smaller minted gold bars which also make great gifts, such as an attractively priced 10 gram minted gold bar.

For customers with a preference for gifting Tola denominated gold bars, PAMP’s 5 Tola gold bar is an affordable weight size between the 50 gram and 100 gram bar weights.

Divisible gold products, often known as combi gold or multi gold, are ideally suited for gold gifting as they consist of a series of detachable gold bars, which can be individually gifted. The 10 gram gold bar MultiDisc from the prestigious Heraeus gold refinery in Hanau, Germany, is a tamper-proof rotatable storage and display disc containing 10 individually minted 1 gram gold bars. This disc’s design allows individual 1 gram gold bars to be dispensed, so is an ideal product for those wishing to gift small gold bars to a series of recipients.

In a similar vein, the 50 gram Gold CombiBar from the famous Swiss refinery Valcambi can be sub-divided into 50 x 1 gram gold bars. Gold CombiBars comprise a 10 x 5 rectangle of 1 gram gold bars about the size and width of a credit card, that can also fit in a wallet. Each Combibar’s 1 gram constituent bars are held together by grooves within the larger gold bar which can be individually attached and given as gifts.

Each 1 gram gold bar segment is also embossed with the Valcambi logo and the segment’s weight and fineness, so when detached, each segment still carries Valcambi’s guarantee of authenticity.

One of the world’s most highly regarded bullion gold coins is the gold Canadian Maple Leaf, produced by the Royal Canadian Mint in Ottawa, Canada. Fabricated in four sizes from a 1 ounce gold coin, through to 0.5 ounce, 0.25 ounce and 0.1 ounce, the gold Maple Leaf range offers an attractive gifting options at a series of price levels, and is a handsome and thoughtful gift for the recipient.

Another timeless gift in the gold bullion coin category is the 1 ounce Austrian Gold Philharmonic coin, produced by the prestigious Austrian Mint, one of the oldest mints in Europe. This 1 ounce gold coin, which is non-circulating legal tender in the Euro zone, celebrates the Vienna Philharmonic Orchestra which is world-famous for its New Year’s Eve and New Year’s Day concerts in Vienna, Austria.

The Most Outlandish Gold Products You Can Buy

BullionStar would like to thank all our friends and customers for supporting us during 2017, and to wish all of you a Merry Christmas and a Happy New Year! To wrap up the year, we have published this light-hearted article about outlandish products made from gold.

Throughout the world, many luxury good companies vie for attention in producing luxury products made from gold, plated with gold, or with substantial gold content. These products tend to be very opulent and usually very expensive because of the gold content and workmanship that goes into them. It seems that nothing is off-limits for receiving the gold treatment.

While a lot of these products may be considered slightly ridiculous, what they have in common is that they are well-designed, mostly customized, and on the whole very valuable. The limited edition nature of the products and the fact that in some cases they are made to order also adds to their rarity value and collectability. Below we profile some of the more outlandish products made from gold, all of which, apart from some one-off customized designs, are available for purchase.

Gold Fidget Spinner

By now, nearly everyone will have heard of fidget spinners, the spinning toy which gained worldwide popularity in 2017. Tapping into this trend, Russian luxury gift specialist ‘Caviar’ released a limited-edition fidget spinner in mid-2017, made from 100 grams of 18-karat gold. As the world’s most expensive fidget spinner, Caviar’s gold fidget spinner model retails for nearly RUB 1m (US $17,000), but is now sold out on the company’s website.

The World's most expensive Fidget Spinner

Golden Tricycle

Toy manufacturer Wisa Gloria is famous in Switzerland for producing a traditional tricycle for young children. However in 2010, Wisa Gloria collaborated with designer Werner Harerer in producing a 24-karat gold-plated version of its classic tricycle, complete with gold-plated wheel bearings.

Wisa Gloria's Gold-Plated Tricycle for 3 - 5 year holds. Source: WikiMedia Commons

Gold Nikon Camera

Nikon is one of the top names in high-end cameras, and its products are synonymous with quality and used widely by professional photographers. Now luxury technology company Brikk, based in California, has gone one step further and created a limited-edition gold Lux Nikon DF camera with matching lens. Both camera and lens are finished in pure 24-karat gold, and only 77 units of this edition have been produced, each costing US $58,000.

Nikon Camera plated in 24-karat Gold. Source: Company website

Gold Shirts

Some readers will be familiar with the story of a customized gold shirt produced for a man in India a few years ago. However, there were actually 2 shirts made for two different Indian men at about the same time. The first famous Indian gold shirt was made in 2012 for a money-lender in Pune called Datta Phuge. This shirt was stitched from 22-karat gold strands, weighed 3.32 kgs, and at the time was said to be worth US$ 240,000.

Pankaj Parakh in a gold shirt, flanked by bodyguards

The second famous shirt made entirely of gold was commissioned in 2014 for a politician / textile businessman named Pankaj Parakh from near Mumbai. This shirt weighed 4 kgs, was made from 18-22 karat gold and cost about US$ 210,000.

Gold staples

These 14-karat gold-plated staples are available from Dutch design company Oooms. Deisgned to be used either as a form of jewelry stapled to clothes or even as luxury conventional staples, they come in a pack of 24, and can be purchased for Euro 59 (about US$ 69). This works out at just under US$ 3 per staple.

Gold-Plated Staples. Source: Company website

Gold Dumbbells

Those who like to work out while being surrounded by gold and opulence might want to consider gold dumbbells. One such company that products gold weights is UK-based Custom Gym Equipment, a specialist in luxury fitness. According to its website, its client-base comes from “the super yacht world, luxury hospitality, luxury interior design and luxury private homes”.

Golden Dumbells. Source: Company website

Gold Table Football (Foosball)

There are a number of high-end table football (foosball) designs on the market, but one of the more luxurious offerings is a gold limited edition foosball table from Italian company Teckell. The table casing, legs and playing field are made from crystal glass, with one of the teams of players is plated with 24k gold, while the other team is decked in chrome. This table retails for around US $24,400.

Luxury Table Football with gold-plated players. Source: YLiving website

Gold Vacuum Cleaner

US company Go Vacuum hit the news in 2012 when it created a limited edition gold-plated vacuum cleaner which retailed for US$ 1 million. Made using 24-karat gold, the gold-plated model GV62711 was limited to 100 units and was a fully functional working vacuum cleaner. Each unit also came with its own engraved serial number and certificate of authenticity.

Gold-Plated Vacuum Cleaner - One of the more ridiculous items made of Gold. Source:

Gold-Plated Supercars

From Ferraris to Lamborghinis, and from Porsches to Mercedes, there are many gold-plated and gold painted supercars on the streets of Dubai. When an expensive sports car is not enough, then the next step is to cover it in gold, like this Ferrari 599 GTB Fiorano

Ferrari 599 GTB Fiorano

Gold Christmas Tree

In 2011, Japanese gold and jewelry company Ginza Tanaka, headquartered in Tokyo, created a pure gold Christmas tree. Containing 12 kgs of gold and standing 2.4 metres tall, the tree is also adorned with gold ornaments, and when it was made cost 150 million yen (which at the time was nearly US$ 2 million).

Ginza Tanaka Gold Christmas Tree

And there you have it folks! While the above list is a selection of some of the fairly outlandish gold laden items that are on the market, at BullionStar we still recommend that you to buy lasting gifts for your loved ones this Christmas and New Year in the form of bullion bars and bullion coins!

Gold Demand in the Singapore Bullion Market

Singapore has evolved into one of the world’s most dynamic gold trading and storage hubs. Following sustained growth over the last five years backed by government initiatives to develop the country's investment precious metals (IPM) sector, Singapore now hosts a vibrant local and regionally focused gold market comprising a wide variety of precious metals participants. These participants range from retail bullion dealers to bullion wholesalers, from precious metals refineries to secure logistics providers, and from bullion banks to trading houses.

One of the early initiatives that transformed Singapore into a precious metals trading and storage hub came in February 2012, when during a budgetary speech to parliament, finance minister Tharman Shanmugaratnam announced that the importation and supply of investment-grade gold and other precious metals in Singapore would become exempt from Singapore’s Goods and Services Tax (GST). Previously the GST on precious metals in Singapore was 7%.

As reported by Reuters in February 2012, Shanmugaratnam in his budget speech envisaged that:

“We will facilitate the development of gold trading, which can draw on Singapore’s strengths as a financial and trading hub, to meet strong demand for investment-grade gold in Asia.”

The GST exemption on investment precious metals was first introduced on 01 October 2012, and applies to transactions in investment-grade gold, silver and platinum that are in the form of high purity bars, ingots and coins. This means that investment grade precious metals purchased in Singapore are free of GST.

International Enterprise (IE) Singapore, an office of the Singapore Government, has also been active in supporting Singapore’s precious metal sector, and in promoting the benefits of Singapore's gold market internationally. Overall, the main aim of IE Singapore and the government in the bullion sphere is to ensure that Singapore becomes and remains the region's primary bullion trading, storage and transport hub.

Jurisdictional Advantages of Singapore

Apart from the GST exemption on investment precious metals, there are a number of other jurisdictional advantages that have supported the growth of Singapore as a gold trading and storage hub, and that reinforce the logic for buying gold and storing gold in Singapore.

In Singapore, there are no other taxes when buying gold, silver or other precious metals. This means no capital gains tax, no other sales tax, no death tax, in short no taxes. There are no reporting requirements when buying or selling gold or silver or other precious metals in Singapore. This means no reporting requirements to any Singaporean authority and no reporting requirements to any international authority.

There is no GST when importing gold and other precious metals into Singapore, or exporting gold or other precious metals out of the country. Singapore is also famed for its strong rule of law, making the country one of the safest and most secure countries on earth to buy and store gold. If taking delivery or selling precious metals, it is quite safe, apart from the usual precautions, to walk in and out of bullion dealer shops in Singapore carrying your precious metals.

Furthermore, the Singapore legal system is very protective of private property rights, and the nation of Singapore has strong  military capabilities, both of which are reassuring when storing gold or silver in the city-state. Finally, because it's a thriving gold trading hub, with a buoyant wholesale and retail bullion market, Singapore has a very well-developed gold storage and vaulting infrastructure, and is very well serviced by secure transport companies.

Precious Metals Sector Participants

IE Singapore sometimes describes Singapore's bullion market participants as a precious metals ecosystem, not just because of the breath of entities present, but because of the way they interact as a sector. This ecosystem refers to the bullion wholesalers, precious metals refineries, retail bullion dealers and secure logistics providers mentioned above, as well as to the bullion banks and trading houses in the wholesale segment of the bullion market.

A large number of investment banks have a presence in Singapore, and many of these banks are active in Singapore’s gold market, either in a trading capacity or via their wealth management units, or both. Some of these banks include Standard Bank, ANZ, UBS, and JP Morgan. Colloquially, investment and merchant banks involved in the bullion market are referred to as bullion banks. United Overseas Bank (UOB), the Singaporean large-scale bank can also be added to this list.

Another group of players in Singapore’s wholesale gold market are referred to as the “trading houses”, and include names such as INTL Stone, Sumitomo Global Commodities, Mitsubishi, and MKS (the precious metals trading arm of the MKS PAMP group).

Since June 2014, Swiss based precious metals Metalor has also operated a precious metals refinery and production facility in Singapore. This move by Metalor to open a facility in Singapore was directly driven by the GST exemption on imports of precious metals that was introduced in 2012 at the same time as the GST exemption on transactions within Singapore. Apart from Metalor, the Dubai headquartered refinery group Kaloti metals also has a presence in Singapore with facilities for smelting gold.

In the secure logistics and transport providers segment, Brinks precious metals operates a regional base and secure storage facilities in Singapore serving Singapore, Malaysia, Brunei, Indonesia and the wider Asian region. Malca Amit also has a storage facility in Singapore, which is located in the Singapore Freeport, near Singapore's Changi International Airport. This Singapore Freeport, or 'Le Freeport' is a secure valuables warehouse complete with vaults which some of the bullion banks in Singapore also use to store precious metals.

Singapore, a thriving gold trading and gold storage hub

A Vibrant Gold Trading Hub

According to the latest precious metals industry survey of Singapore's IPM sector, approximately 656 tonnes of gold and 4253 tonnes of silver were traded in Singapore during 2015. See survey table in Metalor presentation here.  Much of these quantities would reflect trading activity between the large banks or involving the trading houses, and also gold flowing through the refineries operations of Metalor and Kaloti. For example, the trading house INTL could buy gold mining output from Indonesia and have it shipped to Metalor's refinery in Singapore for processing. Metalor is said by industry sources to trade over 100 tonnes of gold per annum.

The survey also notes that the figures reflect sales that were mainly to Singapore, Indonesia, Thailand and Hong Kong but also to China and India, the Philippines and Malaysia. As such, a lot of the physical precious metals trading that goes through Singapore is in the form of supply flows for the wholesale markets in South East Asia and the wider Asian region.

According to IE Singapore data, 291 tonnes of gold was imported into Singapore in 2016, and 397 tonnes was exported. This gives a combined 2 way flow of 618 tonnes.

Most recently, according to a recent Thomson Reuters GFMS report, “Singapore Bullion Flows Surprise to the Upside with a Surge in Shipments in 2017”, for the year to the end of September 2017, gold bullion imports into Singapore reached 224 tonnes. Major import sources were Switzerland, Japan, Hong Kong and Australia. Some of this import activity was gold flowing through Singapore being converted into kilo bars destined for China, but some of it was also gold being smuggled out of China that made its way to Singapore.

GFMS says that apart from China, other export destinations for gold that leaves Singapore includes Cambodia, Thailand and Malaysia. As the figures reveal, there is therefore a huge amount of gold trading in Singapore and a huge amount of physical gold moving in and out of Singapore on an annual basis.

Singapore Retail Gold Demand: Consultancy Estimates

The world's major physical gold wholesalers are also present and active in Singapore,. These wholesalers supply the retail sector in Singapore and the wider South-East Asian region with investment bars and coins and sometimes maintain local inventories of precious metals in Singapore to satisfy demand. These wholesalers include Dillon Gage, which has an office in Singapore, MKS, also with an office in Singapore, and A-Mark, which although it doesn't have an office in Singapore, is an active supplier into the Singaporean bullion market.

Singapore's retail bullion market is active and thriving, and has grown strongly since 2012. It is currently served by BullionStar and a number of other bullion dealers.

A number of precious metals consultancies make estimates on retail physical gold demand in the world's key gold markets, including estimates for retail gold demand in Singapore. These consultancies include Thomson Reuters GFMS, Metals Focus, and the World Gold Council (WGC). Note that the World Gold Council does not gather its own data, and since 2016, the WGC has used Metals Focus to provide all gold supply and demand data for WGC publications, such as the WGC’s ‘Gold Demand Trends’ publications.

In its supply and demand data, GFMS defines physical gold demand as a combination of jewelry, industrial, central bank and retail demand. Retail demand is further divided into gold bar demand and gold coin demand. The World Gold Council / Metals Focus definitions are mostly similar to GFMS, and define a demand category called investment gold, or which “total bar and coin demand” is a sub-sector, and further breaks this down into physical gold bar demand and official gold coin demand, 'official' referring to legal tender coins issued by or on behalf of national mints.

Although each consultancy has its own methodology, and although none of the consultancies publicise the exact way in which their estimates are arrived at (since the data methodologies are commercially valuable), their overall approaches to estimating retail gold demand (gold bar demand and gold coin demand) in a given national market would be similar, and would involve extensive 'field research', i.e. talking to the commercial entities that make up the gold market.

As an example, GFMS' first step is to identify which entities are present in that gold market, for example refineries, banks, wholesalers, and retailers. They then identify those entities that together could provide data giving a full picture of retail gold demand in that market, and then go out and actually interview and talk with representatives from the identified companies.

This also seems also to be the approach Metals Focus follows, since the World Gold Council confirms in its supply and demand data methodology note that Metals Focus uses extensive field research that consists of talking to a network of contacts in the physical gold supply chain. For estimating demand data, this would include talking to refiners, official mints, bullion banks bullion dealers, and secure transport companies. The WGC actually states in its methodology note that:

“Investment demand will be measured using information from mints, manufacturers, retailers, wholesale dealers, banks etc”

Surprisingly, for collecting data on retail gold demand in Singapore, the major consultancies such as GFMS and Metals Focus do not request this data from major retail bullion dealers in Singapore such as BullionStar. Who they actually collect their demand data from is unclear because this type of information is treated as a trade secret by the consultancies. But using a little guesswork, we assume that their logic is to talk to key players in the supply chain (such as refiners and wholesalers) who in their view will provide enough information and feedback with which to create their retail gold demand estimates.

So the consultancies probably talk to the main suppliers of gold into Singapore's retail gold market, such as the Swiss refineries, and the national mints (e.g.Perth Mint and Royal Canadian Mint) and ask them how much gold was sent into Singapore during the year. In a similar fashion, they most likely ask the main gold wholesalers such as A-Mark and Dillon Gage the same questions.

At times, the consultancies probably also chat to the bullion banks and trading houses to glean information on what gold, if any, these entities would have supplied into the ‘retail’ market. As to how the consultancies draw the line between the retail gold market and the high net worth gold market is unclear. Because if a high net worth wealth management client of a bank (such as UBS or UOB) buys physical gold in a transaction facilitated by UBS or UOB, is this captured as ‘retail’ demand. The answer is probably not according to the logic of the consultancies, but at the same time this demand is  not institutional demand either.

Note that in preparing this article, we talked to GFMS and Metals Focus briefly about their retail gold demand estimates. GFMS and Metals Focus were both courteous and helpful and responded speedily.

The World Gold Council's 'market intelligence group' was also approached with similar questions. After repeated attempts to approach the World Gold Council, they eventually acknowledged our request, but then refused to engage and ignored subsequent emails.

Gold Market Demand Figures

For 2016, GFMS estimates that Singapore retail gold bullion demand (comprising bar and coin demand) totaled 6.5 tonnes. For the current year up to the end of September (i.e. Q1 – Q3 2017), GFMS estimates retail demand was 5 tonnes.

For 2016, the WGC's 'Gold Demand Trends' data estimates that  total gold bar and gold coin demand in Singapore totalled 5 tonnes,  while its demand estimate for the first three-quarters of 2017 *Q1 - Q3) totalled 3.5 tonnes.

At first glance, these consultancy numbers look to be on the low side. This is because, based on internal data, BullionStar sold approximately 2.3 tonnes of gold bullion (bars and coins) during 2016. Based on the GFMS and World Gold Council figures, This would mean that BullionStar accounted for 35% of the total 2016 estimate of GFMS, and 46% of the total estimate from WGC / Metals Focus. This would also mean that based on GFMS data, all other bullion dealers in Singapore between them only sold 4.2 tonnes of gold in 2016, and based on WGC figures, all other bullion dealers in Singapore only sold a combined 2.7 tonnes of gold in 2016.

When the consultancies calculate retail gold demand, they claim to take into account the buy-back rate on gold, so as to estimate net gold demand for a particular year. This makes sense. For example, if a bullion dealer sold 1 tonne of gold to customers in a year, and if that same dealer bought back 0.4 tonnes of gold back from customers during the same year, then the net sale quantity would be 0.6 tonnes for that year. However realistically, its hard to understand how the consultancies would know buyback rates since they don't talk to all the major retail bullion dealers in Singapore.

For the record, BullionStar's internal data shows that for 2016, approximately 3 grams on every 10 grams sold was purchased back, meaning that the net tonnage of gold sold by BullionStar in 2016 would have been approximately 1.6 tonnes of gold during 2016.

Each year BullionStar publishes its annual financial results in a transparent and informative way, and also publishes commentary and infographics about these results where can be seen here.

General estimates can also be made on how much gold other bullion dealers in the Singapore gold retail market sold during 2016. This can be done by looking at the sales revenue of each dealer (since most of these companies file financial accounts with the Singapore companies office), and then making assumptions on what percentage of these annual sales were in gold bars and coins, as opposed to silver bars and coins and other products. Then the revenue figures representing gold can be divided by the average gold price during the year to yield quantities sold.

However, when this type of calculation is preformed on the revenue figures of the retail bullion dealer of the Singapore gold market, it yields figures that are higher than those of the consultancies.


So are the gold demand estimates of the major precious metals dealers accurate or under-estimated? The short answer is that the consultancy estimates look to be on the low side. However, the consultancies are not transparent about how they collect data, so the validity of their data collection techniques can't be appraised or tested. Only by giving a full disclosure would it be obvious that they are underestimating figures. However, they will never do this because they are in the business of selling data (i.e. monetising data). If it was proven that some of the consultancy data was inaccurate, it would lower the commercial value of all of their data offerings.

Another issue is how to define the retail segment and retail demand in Singapore and elsewhere. Again this comes back to the fact that the consultancies don't divulge what their data is based on. If we said that the consultancies are under-estimating retail demand because of X and Y, they could theoretically respond by saying "Ahh, but we don't define X and Y as retail demand". But because no one except the consultancies knows how they collect their data, and they will never divulge the sources of their data, such a debate would be virtually impossible to ever have.

Mustafa Centre: Gold in Singapore

While there are a number of specialist companies such as BullionStar servicing Singapore’s retail gold bullion market, the most unusual place to buy gold bars in Singapore must be the Mustafa Centre in the Little India neighborhood.

Located in a building on Syed Alwi Road, and part of another adjacent building on Serangoon Road, the Mustafa Centre is a cluttered haphazard department store and arcade that seems to sell everything from clothes to electronics, from perfumes to gold jewelry, and everything in between. It is also known as being one of the biggest gold jewelry outlets in Singapore.

Crowded and Congested

The Mustafa Centre itself is frequently crowded, often congested, and stays open 24 hours a day. Even trying to approach one of the entrances to the Mustafa Centre can be a stressful experience, and this is after navigating through a maze of often crowded streets if you find yourself approaching from the nearest MRT Station, which is itself a 15 minute walk from Mustafa’s premises.

Once you do happen to find Mustafa’s gold jewelry section, which is located in the basement 1 level of one of the centre's buildings, you will have to navigate past a floorspace crammed with clothes displays before stumbling upon a series of interconnected aisles assigned to gold jewelry.

While this jewelry space is about the size of a basketball court and stacked full of counters displaying gold earrings, gold rings, and gold chains and necklaces, the gold bar and gold coin display is relegated to a tiny rectangular counter, as if it was an after-thought among the masses of gold jewelry being hawked. This small gold bar and coin counter is itself cluttered, and badly presented, and is reminiscent of the display cases of a second-hand IT equipment shop.

Limited Selection

The advertised prices for the limited selection of gold bars and gold coins that are on offer at Mustafa consists of a partially typed and partially hand-written price list page that sits on top of the counter. When this correspondent visited on the Sunday afternoon of 29 October, the price list strangely had the dates 28 - 29 October scrawled at the top, as if it had just been written one time that weekend on the Saturday and then not updated over the weekend.

The accuracy of the prices on that particular price list are therefore called into question. Where the Mustafa Centre sources its gold prices or 'Gold Rate' from is also not clear. In India and India's expat communities, 'Gold Rate' is a term often used to refer to the gold price.

Mustafa's bullion products and their prices, although typed, are squashed on to the list, with various hand-written notes along the left and right side margins. Strangely, parts of the list are highlighted in yellow highlighter marker. What this signifies we do not know, but perhaps it refers to the products that are in stock as opposed to out of stock.

Mustafa's gold product price list, 28-29 October

Within the actual display cases of Mustafa's gold bar display cases, the gold bars are very much crammed into the display area as if everything in stock is actually on display. The old adage of "more is less" as regards presentation and visual display seems to have been lost on whoever lays out the Mustafa display cases.

Mustafa's gold bar display cases - Pack 'em in, Pile 'em high...

Disappointingly, there is also a very limited range and brands of gold bars and gold coins actually offered by Mustafa's gold bullion counter, with nearly everything in the bar section being of the PAMP brand, and with very few gold coin types at all.

Mustafa's gold bullion display cases - hidden in a small section of the gold jewelry store

A number of precious metals research consultancies regularly do field trips to bullion markets around the world, including Singapore, so as to gauge at first hand the level of retail demand for bullion in a particular market. As regards Singapore, some anecdotal evidence we have heard from these consultancies is that it is virtually impossible to calculate the level of gold bullion demand in the Little India area.

Some of the reason for this is because gold bars and gold coins regularly arrive into Little India that have been hand carried from countries such as Dubai or other regional markets. And so this gold would not be reflected in the Singapore supply statistics of, for example, the Swiss refineries or the Canadian and Australian mints.

There are also a lot of resales of gold bullion in Little India, such as a parent swapping gold bars for gold jewelry to give to a sibling as a wedding present. It is therefore difficult to estimate where the gold bullion sold in Little India comes from. Not Mustafa specifically, but this issue must be borne in mind as regards Little India in general.

BullionStar's Spacious Shop and Showroom

In contrast to Little India's Mustafa, BullionStar could not be more different. BullionStar's shop and bullion showroom in central Singapore is located in an easily accessible and well-known section of New Bridge Road across from Clarke Quay Central Shopping mall. BullionStar's premises is also adjacent to the Clarke Quay MRT station. Those working in the Central Business District (CBD) will find that BullionStar is just a short lunchtime walk from the CBD.  And from Chinatown, BullionStar's showroom is less than a 10 minute walk.

Spacious Display Cases in BullionStar's Shop and Showroom

All of the gold bars and gold coins in the extensive range of gold bullion stocked by BullionStar are sourced either directly from the world's most prestigious precious metals refineries and mints such as Argor-Heraeus, PAMP, Heraeus, Valcambi, and the Royal Canadian Mint, or are supplied directly to BullionStar by the world's most renowned precious metals wholesalers such as Dillon Gage and A-Mark. BullionStar staff are also knowledgeable about all aspects of the range of gold and silver bullion stocked.

In BullionStar's shop and showroom, the floor-space is generous, the design calm and ergonomic, with many display cases devoted to gold bullion and silver bullion. Nothing is cluttered, and visitors and customers entering the air-conditioned showroom will be able to browse and view a huge range of gold bars and gold coins, and silver bars and silver coins, with every product type stylishly and spaciously displayed in its own display case. All display cases are also well-lit and well presented.

An impressive feature which BullionStar customers find useful are the electronic screens next to each display case which show updated prices for those products. These prices are live and are displayed electronically and updated electronically in real-time.

A final point to note is that the Mustafa Centre's gold bullion counter does relatively poorly in customer reviews, with customer feedback of poor customer service, dis-interested staff, and prices higher than elsewhere in Singapore. Based on reviews on the Singapore website 'Bullion Reviews', Mustafa scores lowest out of all 6 Singapore bullion dealers featured, with Mustafa getting a total score of 3.9 from 27 reviews.

In contrast, on the same review site, BullionStar receives a total score of 9.1 from 131 reviews. And BullionStar's prices are generally perceived to be some of the most competitive, if not the most competitive, in Singapore.

Bitcoin isn’t Digital Gold, it’s Digital Uselesstainium

This blog post is a guest post on BullionStar's Blog by the renowned blogger JP Koning who will be writing about monetary economics, central banking and gold. BullionStar does not endorse or oppose the opinions presented but encourage a healthy debate. 

People often like to describe bitcoin as digital gold, but that analogy isn't a very good one. Bitcoin is categorically different from the yellow metal. If we had to choose a metal as an analogy for bitcoin, that metal would be boring grey in colour (and thus lacking ornamental purpose), useless for industrial purposes, but scarce. As far as I know no such material exists, so let's come up with a name for this imaginary metal: uselesstainium. Bitcoin is digital uselesstainium.

Before bitcoin fans get angry with me, I should confess that I got the idea for uselesstainium from a 2010 discussion board post by Satoshi Nakamoto, the creator of bitcoin. Below are his thoughts on a scarce metal that is "boring grey" and "not useful for any practical or ornamental purpose":

Let's dig more into the difference between gold and this stuff we call uselesstainium. There are two reasons to value something: 1) because you want to use it, or 2) because you expect to pass it off in the future. Pass-it-off demand may be for short-term purposes, like money—you only expect to have a dollar bill in your wallet for a day or two before spending it on. Or it may be for the long-term, like a speculative asset that you intend to keep for a few years before selling to someone else. Either way, pass-it-off demand means that the item's value to you depends on what *the next person* is willing to provide, not on its use-value.

The demand for gold is made up of both types of demand. A portion of those active in the gold market value it as jewellery or a collectors item, or because it can be used to make circuitry or in satellites. The other portion likes the metal for its pass-it-off purposes, say they expect that someone else will pay twice the price next year.

Because it is an ugly grey colour and thus unsuitable for collectors or jewellery wearers, and it can't be used in teeth nor for industrial purposes, uselesstainium has no use-value. If it is going to be valued at all, then pass-it-off demand will have to be wholly responsible for generating that value.

Gold and a fat-finger trade

Thanks to this difference, the prices of gold and uselesstainium will act very differently. Let's say the two metals are each trading at $1000/oz. Each of them suddenly suffers from a freak $100 drop in price. No event has occurred to cause it, nor have people's tastes change, nor has the technological backdrop been altered. It's a fat finger event.

In this context there is *no* fundamental reason for uselesstainium to return to $1000. With gold, however, strong market forces will emerge to help fix the mistake and push the price up towards $1000.

Gold is a good conductor of electricity. And unlike copper and other metals it doesn't corrode, which means that gold electrical connections are superior to most. However, an ounce of gold is much more expensive than an ounce of copper or any other metal. When gold was at $1000, manufacturers of printed circuit boards (PCB) will have made a tradeoff between gold and other materials subject to the preferences of their customers, choosing the optimal amount of gold for the parts of the board that are too delicate to suffer from corrosion while directing copper, silver, and other materials to the rest.

But with gold now at $900, the yellow metal has become marginally more competitive than other metals. At these prices, PCB customers can afford to ask for a bit more gold on their boards. This demand will help drive gold back up to $1000. The PCB market won't be the only market to demand more gold. Collectors, jewellers, dentists, and many others will all find gold a little more advantageous than before relative to alternative materials and will step up their buying. Their combined purchases will help counterbalance the mistaken fat finger trade.

Speculators who are attracted to gold solely for its pass-it-off value will contribute to this rebound. Because they are constantly trying to anticipate the needs of future buyers, including those in the PCB market, speculators will purchase as much gold as they can from the fat finger trader based on their informed opinion that they can resell it to board manufacturers at a higher price.

Uselesstainium and a fat-finger trade

When uselesstainium falls to $900, no equivalent forces exist to drive the metal's price back to $1000. Remember, because uselesstainium has no industrial value the only basis for valuing it is by trying to guess what price it can be passed off to others. Whereas a gold speculator can try to anticipate the needs of participants in the PCB market, a uselesstainium speculator can only sell to other speculators. This means that she must try to anticipate what other speculators are likely to pay, while at the same time these potential buyers are in turn trying to anticipate what she will pay.

This sort of expectations game was beautifully described by the economist John Maynard Keynes back in 1936 as a beauty contest. Presented with a row of faces, a competitor has to choose the prettiest face as estimated by all other participants in the contest:

"...each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees."

Confronted with a sudden $100 crash, there is no inherent reason for a uselesstainium trader to anticipate that average opinion anticipates average opinion to move the price back up to $1000. A move up to $1100, or down to $700, or a collapse to $0, are all just as likely. In a beauty contest, there is no right or wrong price for uselesstainium.

Bitcoin is digital uselesstainium

Since there is no use-value to anchor uselesstainium's price, we'd expect it to be far more volatile than gold. Likewise with bitcoin, which is both rare and demanded solely for pass-it-off purposes. Let's take a look at a chart of the relative volatility of bitcoin and gold to see what it shows.

What you see in the above chart is the median daily change for each asset plotted over a moving 200-day period. By using the median rather than the average I am stripping out some of the large gut-wrenching changes that assets experience, in an effort to give a sense of what happens on a day-to-day basis.

Gold's median change since 2011 (the black dashed line) is around 0.5%. This means that on a majority of days you should expect a gain or loss of around 0.5% if you hold the yellow metal. Over the same time range, bitcoin's median change (the dashed red line) is about 1.7%, which means that an owner of bitcoin must generally deal with moves of +/-1.7% each day, more than three times what a gold owner must bear.

Bitcoin's rolling 200-day median return (the solid red line) is much less stable than gold's. It almost fell to the same level as gold in late 2016, hitting a low of around 0.75%, but has quickly moved back above 3%, a level last seen in 2011 and again in 2013-14. The volatility gap between gold and bitcoin—the distance between the two solid lines—is currently at its widest since 2012.

Bitcoin will always be an incredibly volatile asset because it exists entirely on pass-through demand. Like uselesstainium, it is a pure Keynesian beauty contest. If all contestants in the bitcoin price-setting game come to believe that the average contestant believes that the average contestant believes bitcoin is worth $0, then that belief will self-realize itself and bitcoin will fall to $0. If they all become 100% sure that it should be worth $100,000, then it will jump to $100,000. These sorts of price implosions and explosions can't happen with gold because its usefulness inspires economic behaviour that counterbalances beauty contest dynamics.

Now it is possible that bitcoin inherits some useful properties and therefore shifts from being a form of digital uselesstainium to a form of digital gold. Bitcoin advocates will often mention time-stamping as a service. People can take a digital representation, or hash, of a document and put it on the bitcoin blockchain by spending a small amount of bitcoin. Once accomplished the owner of the document will be able to publicly prove that they were the owner of that document on that date. Bitcoin time-stamping would in theory compete with other alternatives, like real-life notaries or the post office. In the event of a bitcoin price crash, anyone who wants to get cheap time stamping services may step in as buyers of bitcoin, in the same way that PCB makers support the gold market.

However, time stamping is still in its infancy. Certainly other uses for bitcoin apart from time stamping may eventually be found, but until then bitcoin remains digital uselesstainium, not digital gold. Plenty of money can be made betting on uselesstainium, and much can be lost. But no one should be buying uselesstainum—whether it be the digital type or physical—unless they are comfortable playing in a pure Keynesian beauty contest.

This blog post is the second in a series of guest posts on BullionStar's Blog  by the renowned blogger JP Koning who will be writing about monetary economics, central banking and gold .