Although China is the world’s biggest producer of gold – mining over 46 tons in 2019 – the United States owns the most, with more than 8,000 tons of gold bullion in its vaults. However, only a mere 12 percent of the US population own gold, the majority of whom are middle-aged men.
Generally speaking, people can invest in gold in three ways: purchase the physical asset, buy shares of an exchange-traded fund (ETF) or trade options in stock markets. The problem is, these channels are unfamiliar to everyday people who don’t understand the terminology, processes, and more importantly, how to use the system to make smart decisions with their money.
The result is that only a select few people buy and sell gold, while others lack access to it and thus the possibility of benefiting from its intrinsic value.
A historically exclusive asset
The exclusivity of gold is not a recent phenomenon. Throughout time, owning gold has been reserved for the powerful, rich, and well-connected. Even in ancient communities, only important figures had the precious metal and were typically expected to gift it to the gods they worshipped. The hierarchy in gold ownership was also visible through the use of slaves, prisoners of war, and criminals to mine for gold.
Why then, centuries later, is gold still not a democratic asset? And just how can gold be democratized?
Even in 2020, political leaders have used gold to manipulate economies, impacting everyday people the hardest. The political leadership in Venezuela has been accused of moving gold out of the country for personal gain, while a string of politicians in China have hidden gold in their homes and used it to pay for bribes.
This power imbalance depletes sources of national wealth that should be going towards citizens.
Skewed demand for gold across industries
Demand for gold across industries is distributed in a problematic way. Reports show that jewelry accounts for 52 percent of the total use of gold, while bars and coins make up 25 percent, electronics 9 percent, and dentistry 1 percent. The rest is split between industrial uses, central bank purchases, and ETFs.
The heavy demand for gold as jewelry demonstrates how gold is typically seen as a luxury afforded in most part by the wealthy. In comparison, only one-quarter of all gold is made into bars and coins that are available to own and trade, and even so, it is hard for ordinary people to purchase them. Furthermore, when economic crises drive gold demand through the roof, physical gold units become even more scarce and expensive to own for regular people.
Why access to gold matters
Gold has proven to be a historically stable, trustworthy asset. Unlike paper money – which loses its value as more are printed – and other assets, gold tends to preserve value, and people turn to it in times of economic uncertainty.
The value of gold isn’t dependent on how profitable businesses are, so if stock markets suddenly drop, gold remains relatively unaffected. Studies show that gold prices rise 15 days after a crash on average. Still, the protection offered by gold isn’t largely available to ordinary people who need to protect their savings during turbulent times.
The current COVID-19 pandemic is a prime example. The United States and countries globally face what may well be the worst financial crisis of this generation. Countries that were already battling economic instability are now on the cusp of a major debt crisis. Although stronger economies can afford government bailouts, developing countries cannot, leaving regular citizens to cope by their own means. For people around the world, gold could offer a real alternative for people to preserve their wealth, and not be at the whim on the fluctuating value of stock markets and fiat money (traditional government-issued currencies).
The beginnings of gold democracy
Democratizing gold would empower people worldwide from all economic backgrounds to take control of their personal finances and access a safer, long-term store of value that isn’t influenced by decisions made in traditional financial institutions. It would give everyday people independence from unfair economic and political systems in which people’s personal money isn’t always prioritized.
For democratization to truly take place, transparency is key. Pricing around gold has to be simple and straightforward. People need clear information about the inner workings of gold trading and purchasing systems. Also, companies that facilitate buying gold have to always be open to scrutiny and auditing.
Coro is part of the solution. Its new app allows users to use gold as money as easily as any other currency. Users can exchange US dollars for gold and vice versa, and freely send and receive payments in gold. By bridging the divide between ordinary people and real gold, Coro is creating a new, fairer, and more inclusive financial ecosystem.
To make the process as transparent and accessible as possible, Coro’s system is simple and easy to use, without any technical expertise needed.