Retail investors will move into gold once the reality of high inflation and weak equities sets in, while the absence of regulatory clarity limits gold’s gains on the blockchain, according to Deven Soni, CEO of Matador Gold Technologies, a company that enables physical gold purchases using blockchain technology.
“Most people that pay attention think that 2023 is going to be a pretty good year for gold and precious metals,” he said. “Retail investors have a bit of a lag, and I think there’s a lot of wishful thinking still in the stock market and a lot of hiding under the pillow and just holding cash. When you start realizing that inflation’s eating away your actual savings under your mattress, I think there’s going to be a retail push into gold.”
Soni spoke with Kitco News journalist Ernest Hoffman at the recent PDAC 2023 mining convention in Toronto, where he said that he sees the crypto and gold communities coming at the same problems with fiat currencies and central bank policies from different directions.
“I think there’s certainly a parallel here,” he said. “I think people that buy physical metals do so because they want a backup plan in case things go wrong, and I think Bitcoin and other holders often feel the same way, they feel that the current regulatory and financial system hasn’t performed the way they want. The difference is, one is really saying we’re going to change everything, whereas the gold vision is, we want things back the way they were, with the gold-backed dollar. So it’s a little bit of a rewind versus fast-forward.”
Soni said that for their part, the gold investment community is waiting for clear regulation that protects them before they fully embrace gold on the blockchain.
“One of the biggest challenges, especially in markets like North America, has been the regulatory lack of clarity in this space,” he said. “When you’re buying an asset that you want to hold for the next hundred years or pass down future generations, you really want to truly understand that this is something that’s not just going to be there from a physical perspective but also going to be there from a regulatory perspective.”
He said that investors have watched as many blockchain-based projects ultimately wind down after losing the uphill battle of fighting the regulators. “It’s such a big challenge for companies, because you’re a startup, you’re starting something innovative, you’ve got a big idea,” he said. “You don’t want to be fighting the technology war, the customer acquisition war, and be fighting a regulatory battle at the same time.”
“I think until there’s true visibility in the same way that ETFs are very clearly regulated, that holding physical gold and precious metals are very clearly regulated, I think until you see that same level of clarity, you’re not going to have as much adoption because those customers really like that regulation.”
Soni also believes that even though blockchain technology provides the opportunity for self-custody and transparency, physical gold still enjoys a big edge in trust based on its track record.
“When you have full possession of things, there’s a whole other layer of risk that gets involved. Everyone’s seen the stories of people losing their private keys and losing millions or tens of billions of dollars. There’s that downside of having your self-sovereignty,” he said.
“Finding a happy medium, where yes you have auditors, yes you have vaults that you’re supposedly trusting, but what you also have is this form of recourse. Having an undo button if you lose your keys or someone breaks into your house is a little safer in the grand scheme of things than just trusting a piece of paper with a couple of numbers on it and making sure you keep those safe. I’m a big, big bitcoin and crypto investor as well, and I certainly think that things will catch up. But today, and for the average person, I think it’s a lot safer to trust auditors and vaults than to trust your own technical prowess to preserve something.”
Soni believes that the record-setting pace of central banks’ gold purchases will continue, because it’s being driven by long-term economic concerns.
“The big things that central banks are thinking about are trying to take a little bit back from their own sovereignty,” he said. “So much of the world’s economy has been built on the dollar and holding dollars. When you see the inflation, you’re looking around and saying ‘I’ve heard this story before. When things go up and things go down with the dollar, I lose a lot of control and a lot of people start losing faith in my currency, so I need to actually do something to shore things up and bring a little bit of control back.’”
He also believes some countries will go as far as launching gold-backed central bank digital currencies (CBDCs), and the early adopters will be countries that must find a way to support their collapsing fiat currencies.
“I think countries that have to think about this are the ones that just have had really, really terrible luck in their economies the last couple of years, which is often due to mismanagement and corruption,” he said. “You look at Argentina and Lebanon and Venezuela, places like this, it’s almost like anything is better and you’ve got the people revolting. So those places are going to have a real push, and you might have newly elected leadership that has to make a drastic change, and especially in a market like 2023 as you see a lot of popular mindshare is moving toward precious metals, you’ll see someone making a drastic change and tipping the first domino.”
Given all the factors working against currencies and traditional investments, Soni has a strong gold price target for this year.
“Personally, I see a 20 to 25% increase in 2023, so let’s call it $2400, $2500, somewhere in there.”