MetalStream Gold (MSGLD) tokens are gold backed, ERC-1400 standard compliant security tokens employing a metal stream financing model.
Gold as an Investment
Investors have long recognised the benefits of investing in gold. Over time gold have been shown to improve portfolio risk-adjusted returns, offering diversification, inflation protection and an element of smoothing across economic cycles.
commodity, investment & consumer good
Gold is a raw material used in the production of manufactured goods, but is also oth an investment and a consumer good, with diverse supply and demand dynamics. Gold deserves to be seen as a differentiated asset as they have historically benefited from six key characteristics.
- Delivers better long-term, risk-adjusted returns
- A more effective diversifier
- Outperforms in low inflation periods
- Lower volatility
- A proven store of value
- Highly liquid
Positive Returns During Growth & Risk periods
Gold has little or no correlation with many other assets, including commodities, during times of economic volatility and risk. Like other commodities, gold is positively correlated to stocks during periods of economic growth when equity markets tend to rise. However, gold is negatively correlated with other assets during risk-off periods, protecting investors against tail risks and other events that can have a significant negative impact on capital or wealth – a protection not always present in other commodities.
This reflects gold’s dual nature as both a consumer good and an investment. When economic conditions are benign, expenditure tends to increase on items such as jewellery or technological devices and this works in gold’s favour.
During times of systemic risk, market participants seek high-quality, liquid assets that preserve capital and minimise losses. This also benefits gold by boosting investment demand and driving up prices. For example, in the Q4 2018 global equity sell-off, the S&P 500 fell 14% and commodities fell 9%, yet gold rose 8%.
Unit of Exchange & Backing
Gold has a long and influential role as a monetary asset. Considered a rare and precious commodity for centuries, gold was the logical choice as a currency anchor and performed this role until the US came off the gold standard in 1971.
In-demand with Central Banks & Governments
While gold no longer plays a direct role in the international monetary system, central banks and governments still hold extensive gold reserves to preserve national wealth and protect against economic instability. Central banks are buying gold at an ever-increasing pace; in 2018 alone they purchased more gold than at any time since the end of the gold standard – and that trend has persisted through the first half of 2019.
Today, gold is the third-largest reserve asset globally, after USD and EUR reserves. Moreover, gold is increasingly used as collateral in financial transactions, much like other high quality, liquid assets such as government debt.
Market Robust and Highly Liquid
The gold market is robust and highly liquid, with all indications that it will stay so.
On the futures market, daily volumes average USD 51 billion, second only to oil
On the OTC market, estimated volumes are even higher, at around USD 61 billion
There is a thriving physical gold-backed ETF market, with daily volumes averaging USD 1 billion
Overall, average daily trading in the global gold market ranges between USD 100 billion and USD 200 billion a day
High Price and forecast
Gold is currently trading at its highest levels since 2013, at around USD1,500 oz, with the trend forecast to continue, as market participants hedge against fiat-currencies.
More information on gold and silver’s performance can be found on the World Gold Council website.
storage & transportation
Whilst gold is an effective investment, bullion is by its nature difficult to store and transport. It is heavy and impractical to carry over any distance. Logistics require payment to third parties for storage or transport.
Holding physical gold can also be risky, as it requires high-levels of security, and can make the holder a target. This requires outsourcing storage to a third-party and payment of fees, or additional security.
Buying and selling even small quantities of bullion is impractical without the involvement of third parties due to the above issues. These issues can be somewhat overcome by storing physical gold at a bullion house, but this then attracts ongoing storage and insurance costs - and requires trust that the depository receipt is unique to the holder.
The provenance of gold can also be an issue - where did it initially come from, how many times has it been melted down and reinvented, who has owned it, and who is the current rightful owner? It is very difficult to audit.
MetalStream Token Overview
MetalStream’s revolutionary MSGLD tokens combine the attractiveness of gold as an asset, with the discount offered by a metal stream contract, and the utility of a security token.
Asset tokenization and issuance of security tokens are the future of capital markets. Digital securities bring innovative opportunities, reduced operational costs, greater access to capital, and increased liquidity.
Unlike digital currencies and other tokens, MSGLD are securities fully backed by physical gold extracted from mines in several countries to reduce risk.
The underlying asset value prevents the token value from falling materially below the market spot price for gold, as the holder may redeem tokens for certified bullion as per the terms of issue.
MetalStream limits the issuance of tokens to a maximum of 12.5% of the defined metal resources of our suppliers' mines, in order to provide scarcity and risk mitigation for the investor.
MetalStream has partnered with Blockchain Labs Asia for the issuance of the MSGLD tokens. Blockchain Labs Asia is a global leader in the creation and issuance of security tokens, having tokenized more than USD 27 billion of assets internationally.
As ERC-1400 compliant security tokens, MSGLD allows full compliance with securities laws in all relevant jurisdictions, whilst providing the benefits of transparency, decentralisation and immutability.
The tokens can only be transferred from MetalStream to qualified investors, and can only be transferred from those investors to other parties that have completed KYC/AML checks, after the holding period of 90 days, from the date of issue to the subscriber by MetalStream.
MetalStream only works with miners that have a significant histories in the industry. Unlike other companies offering tokens, MetalStream is not attempting to create a new currency that requires market adoption, or sell a potential future utility that requires the creation of a product or service. The funds raised from the sale of MSGLD tokens go directly into backing of the token.
The majority of proceeds from the sale of MSGLD from this first issuance will be allocated to purchase the metal streams (equating to less than 12.5% of known gold resources) in identified mines, to finance extraction.
Up to 25% of proceeds will be held in storage as gold bullion with an LBMA accredited bullion house, to provide liquidity for token holders prior to extraction of gold from the mines.
Benefits of MSGLD
MetalStream's tokens provide many benefits for the holder over traditional methods of buying and holding gold.
As tokenized gold available for purchase globally, MSGLD tokens are inherently more liquid than the physical metal itself.
MSGLD tokens can be traded directly, and are planned to be listed on multiple secondary exchanges, offering 24 hour liquidity for token holders.
MSGLD tokens can be redeemed in lots of 2,000 for a 10 oz gold bar after the minimum holding period as stipulated by the regulatory authorities, and after a bullion delivery date has been declared. Around 25% of proceeds for the sale of MSGLD will be used to acquire bullion for early redemption.
The MSGLD token holder is granted a perpetual option on gold which can only expire or be cancelled upon delivery of the physical gold against the token. There is therefore no expiry date on the security token itself.
MSGLD tokens are backed by gold produced by reputable mining developers. MetalStream will provide publicly available, transparent reports and assessments verifiable via third parties. MetalStream are the first to provide investors with this link as the counterparty for an asset backed digital security token.
The MSGLD tokens are certified by Blockchain Labs Asia to be compliant with the Ethereum ERC-1400 standard, and meet the requirements necessary to be listed as a “Security Token” and “Tokenized Asset”. The source code for the smart contracts can be inspected along with information about the token and holders via Etherscan.
Aside from having an asset-backing, as ERC-1400 compliant security tokens MSGLD offers inherently greater levels of safety and security to the holder over a utility token or cryptocurrency. Ownership of precious metal via MSGLD is safer than traditional means of ownership, as the blockchain provides an immutable audit trail and proof of ownership, including the physical verification of the gold and silver itself.
If a token holder loses access to their private keys, MetalStream is able to reissue tokens quickly and efficiently. In the unlikely event that the tokens are proven to have been transferred to a third-party as a result of theft or fraud, MetalStream may execute a forced transfer to allow full recovery of the tokens by the rightful owners.
Unlike other metal backed ICOs offering tokens at face value or even a premium, MSGLD tokens are offered to investors at a 33.26% discount to the current USD 1,648.10 spot price of gold. This represents an immediate 1.50x return, and a potential future 1.65x return (on a future gold price of 1.1 per CME gold futures).
Redeemed gold will have a minimum fineness of 99.5% as certified by the London Bullion Market Association (LBMA).
Unlike holding physical bullion, MSGLD incur no ongoing storage fees or other costs.
As an ERC-1400 compliant token issued on the Ethereum blockchain, the only fees for transfer of MSGLD are the “gas” associated with the transaction (a fee for the validation by the Ethereum network of the transaction and addition of the transaction to the next block). This is typically cents, rather than dollars.