(DIGITAL GOLD – WHAT’S IT ALL ABOUT?)

November 1, 2024

Hello everyone

DEFINITION

Digital gold represents a modern evolution in precious metal investments, bridging traditional assets and innovative technology. In other words, it’s a way to invest in gold electronically.   As a digital counterpart to physical gold, it enables investors to engage with gold markets online, eliminating challenges related to storage and security.

HOW DO YOU BUY/SELL DIGITAL GOLD?

The process of buying and selling digital gold involves a series of straightforward steps facilitated through online platforms or apps.

To buy gold digitally, users must create and verify an account and fund it using net banking or mobile wallets.

Once the account is funded, users specify the amount of digital gold they wish to purchase, enabling them to buy gold or buy gold online.

The platform will display the current market rate, and the equivalent physical gold will be securely stored in insured vaults.

When selling digital gold, users simply log in to their account, view the current market rate, and confirm the sale. The funds from the sale are then credited to their bank account. Users who prefer to receive physical gold can submit a redemption request, which may incur additional charges.

This entire process ensures a transparent and secure investment experience, providing peace of mind to investors. Moreover, an investor who buys and sells electronic gold enjoys enhanced liquidity and flexibility while also benefiting from the assurance of limited supply.

DIGITAL GOLD & TANGIBLE GOLD:  THE DIFFERENCES

Physical and digital gold differ significantly in ownership, storage, and transaction methods. Digital gold allows investors to purchase virtual units backed by actual gold stored in secure vaults, with taxation and investment aspects including tax rates on selling, holding time for long-term capital gains, and benefits as an efficient and safe alternative to traditional physical gold purchases. This approach offers the convenience of online transactions, with the value directly tied to the market price of physical gold.

Physical gold ownership involves direct possession of tangible items such as gold coins, gold bars, or jewelry, requiring secure storage and physical handling. Both options serve as viable investments; digital gold provides enhanced convenience and ease of transaction, while physical gold offers a tangible asset that some investors may prefer for diversification.

BENEFITS OF INVESTING IN DIGITAL GOLD ASSETS

Investing in digital gold offers several advantages over physical gold. One significant benefit is greater convenience; investors can purchase gold online without the need to store it physically. This eliminates the challenges and costs associated with storage, insurance, and transportation.

Gold mutual funds investors can also benefit from digital gold, which provides a way to diversify their portfolios without requiring physical ownership.

Digital gold platforms also allow for fractional ownership, enabling investors to build their holdings even with smaller amounts of money. This feature increases accessibility for a broader range of investors.

Digital gold is highly liquid, allowing for quick conversion to cash, which is often more cumbersome than physical gold, which requires finding buyers.

Transaction costs for digital gold are generally lower than those for physical gold. Since digital gold is often linked to gold exchange-traded funds (ETFs) or gold mutual funds, it provides transparency and real-time tracking. This is particularly beneficial for investors looking to mitigate market volatility and ensure a trustworthy investment process.

DISADVANTAGES OF INVESTING IN DIGITAL GOLD

Investing in digital gold offers numerous advantages, but it’s important to consider the accompanying disadvantages. Unlike physical gold, digital gold lacks tangibility, potentially leading to a less satisfying experience for some investors. (Some people just like that security of holding a piece of gold).  On the other hand, physical gold investment often carries an emotional value and can have different taxation considerations.

Buying digital gold exposes investors to cybersecurity risks, as the security of digital gold holding depends on the robustness of the issuing platform. (That’s why I always recommend transferring your digital assets to a decentralized wallet for safekeeping).

While accumulating digital gold is relatively easy, platform fees and transaction charges may affect overall returns. Furthermore, digital gold holdings may face limitations on investment amounts and acceptance, distinguishing them from physical gold in terms of utility. You may also want to consider exploring gold futures contracts, which offer a different approach to trading precious metals.

BEST PLATFORMS TO USE FOR DIGITAL GOLD TRADING

You can buy and sell digital gold in the United States on several reputable online platforms and mobile apps. Major financial institutions like JPMorgan Chase and specialized digital gold providers such as Paxos, Uphold, Gold Money, and Vaulted offer blockchain-based digital gold products.

These platforms allow investors to add digital gold to their portfolios seamlessly. Each unit of digital gold is backed by physical metal stored in insured vaults, ensuring it remains a solid store of value. Investors purchase tokens representing specific amounts of precious metals, enabling secure and transparent digital transactions.

This approach offers a reliable way to incorporate digital gold into diversified investment strategies.

SECURE STORAGE SOLUTIONS FOR DIGITAL GOLD HOLDINGS

The physical gold bullion supporting digital gold holdings is stored in highly secure, insured, and audited vaults managed by reputable companies such as MMTC-PAMP and Safe Gold. These vaulting facilities employ advanced security systems to ensure the utmost safety and integrity of the stored physical gold.

Security measures include:

• Armed guards: Ensuring constant vigilance and immediate response to threats.
• Biometric access controls: Restricting access to only authorized personnel.
• CCTV surveillance: Offering 24/7 monitoring to deter and document any unauthorized activities.
• Theft prevention: Utilizing state-of-the-art technology to safeguard digital assets.
• Unauthorized access prevention: Implementing multi-layered security protocols to prevent breaches.

These insured vaults undergo regular audits to maintain transparency and trust in the system, providing investors with peace of mind when they accumulate digital gold.

BLOCKCHAIN & ENCRYPTION

Blockchain technology underpins the recording and security of all transactions involving digital gold, ensuring an immutable and transparent distributed ledger. Digital gold platforms utilize advanced encryption and cryptographic techniques to safeguard user data and digital wallets. These methods prevent hacking and maintain the integrity of ownership records, thereby fostering a high level of trust and reliability.

• Immutable records: Transactions are permanent and unchangeable.
• Data protection: Advanced encryption secures user information.
• Hacking prevention: Security measures block unauthorized access.
• Reliable ownership: Precise records of digital gold ownership are maintained.
• Secure storage: Digital wallets provide a safe repository for digital gold.

CONVERTING DIGITAL GOLD TO PHYSICAL GOLD BULLION

You can convert your digital gold holdings into physical gold through reputable digital gold platforms, as physical gold remains a tangible investment option. These platforms offer a redemption process that transforms your digital gold into physical gold, such as coins or bars.

The process involves de-tokenizing your digital holdings and converting them into physical gold using blockchain technology. You typically need to submit a request specifying the denomination and quantity, following the platform’s terms and conditions.

Additional fabrication, shipping, and insurance fees may apply for physical delivery. To ensure a smooth transition, carefully review the terms and conditions provided by your digital gold platform.

THE OUTLOOK FOR DIGITAL GOLD

The outlook for digital gold is promising, driven by advancements in technology and shifting investor preferences toward more accessible and liquid investment options. As the investment landscape evolves, digital gold is gaining traction, particularly among younger investors. Blockchain technology enhances digital gold's resilience against market volatility and economic uncertainties.

Digital gold provides greater accessibility and convenience, improved security through blockchain technology, diversification potential in volatile markets, and lower costs compared to physical gold. These attributes particularly appeal to tech-savvy, younger investors.

Digital gold’s potential for diversification and growth positions it as a compelling alternative within the investment landscape.

HOUSEKEEPING

I’ll be sending out Zoom links shortly for our monthly meeting for October.

Cheers

Jacquie

(TIME TO STEEL YOURSELF FOR A NEWSY WEEK JUST BEFORE THE ELECTION)

October 28, 2024

Hello everyone

WEEK AHEAD CALENDAR

Monday, Oct. 28

10:00 a.m. Richmond Fed Index (October)

10:30 a.m. Dallas Fed Index (October)

7:30 p.m. Japan Unemployment Rate

Previous: 2.5%

Forecast: 2.5%

Earnings: Ford Motor, On Semiconductor

Tuesday, Oct. 29

8:30 a.m. Wholesale Inventories preliminary (September)

9:00 a.m. FHFA Home Price Index (August)

9:00 a.m. S&P/Case Shiller comp. 20 HPI (August)

10:00 a.m. Consumer Confidence (October)

10:00 a.m. JOLTS Job Openings (September)

8:30 p.m. Australia Inflation Rate

Previous: 3.8%

Forecast: 2.9%

Earnings:  Visa, Chipotle Mexican Grill, First Solar, Caesars Entertainment, Advanced Micro Devices, McDonalds, Pfizer, Royal Caribbean Group, PayPal, D.R. Horton, Alphabet.

Wednesday, Oct 30

8:15 a.m. ADP Employment Survey (October)

8:30 a.m. GDP Chain Price first preliminary (Q3)

8:30 a.m. GDP first preliminary (Q3)

10:00 a.m. Pending Home Sales Index (September)

10:00 a.m. Pending Home Sales

Earnings:  Microsoft, Meta Platforms, Starbucks, Kraft Heinz, Caterpillar, Eli Lilly, GE Healthcare Technologies, Clorox, Bookings Holdings.

Thursday, Oct. 31

8:30 a.m. Continuing Jobless Claims (10/19)

8:30 a.m. ECI Civilian Workers (Q3)

8:30 a.m. Initial Claims (10/26)

8:30 a.m. Core PCE Deflator (September)

8:30 a.m. PCE Deflator (September)

8:30 a.m. Personal Consumption Expenditure (September)

8:30 a.m. Personal Income (September)

9:45 a.m. Chicago PMI (October)

Earnings:  Apple, Amazon.com, Norwegian Cruise Line Holdings, Uber Technologies, The Estee Lauder Companies, Mastercard, Generac.

Friday, Nov. 1

8:30 a.m. Jobs Report (October)

Previous: 254k

Forecast: 140k

9:45 a.m. S&P PMI Manufacturing final (October)

10:00 a.m. Construction Spending (September)

10:00 a.m. ISM Manufacturing (October0

Earnings:  Exxon Mobil

It’s a data heavy week.  Big Tech reports earnings, and expectations are high, but many analysts are still beating the table on these tech stocks, particularly Meta (META), Apple (AAPL) and Microsoft (MSFT) believing they have further room to run. 

The employment report on Friday takes on additional significance ahead of next week’s FOMC meeting.  Market participants will also closely monitor Q3 GDP estimates and PCE inflation figures throughout the week.  These high impact releases could reshape market sentiment heading into the US election.  In fact, any deviation from the recent streak of robust economic data could potentially lead to significant moves in the US dollar.

‘Toy’ Drones Could Be A ‘Real’ Tool for Terrorists

Britain’s streets could be transformed into chaos if Extremists use “toy drones”.  This is the warning from the Government’s counter terrorism management team. 

Current rules enforced by the Civil Aviation Authority (CAA) require people operating drones weighing more than 250g to be registered and pass a theory test.   However, lighter devices are widely available and are not subject to the same rules.

The world’s biggest drone company DJI sells multiple models advertised as weighing 249g.

In the UK there is regulation affecting the use of drones and it includes some provision for licensing users, but the regulation does not apply to ‘toy’ drones.

The Gold Boom

We all know that gold’s value is driven by interest rates, inflation and geopolitical fears; it is the insurance of choice for investors seeking security.  When interest rates fall and returns on some assets slide with them, gold can be a safe bet.  When inflation erodes a currency’s purchasing power, the price of gold rises like everything else.  Furthermore, it is also a haven commodity for investors, who are concerned about war and global tensions. 

This boom seems a little different, particularly the drivers of the gold price.

Central banks of emerging nations have been the big buyers of the past couple of years.  Many of these nations are hostile to the United States and see hoarding more gold as financial protection.  Others just think that the days when the dollar was the dominant means of global exchange is waning.

That’s a big wake up call for the West.  Mohamed El-Erian believes that we could be witnessing a fragmentation of the international financial system based on the dollar.  And that would mean eroding US power.

Central bank gold buying hit a record high in the first three months of 2024, according to the World Gold Council.  India, Uzbekistan, Qatar, Russia, Iraq, and Jordan were among the biggest purchasers.  China has increased its buying too.

It appears many countries are calling time on America’s “weaponisation” of the dollar.  Collectively, these countries may conclude that they might be better off with an alternative currency to use for international trade.  And holding more gold could be a foundation for a new payments system. 

Russian president Vladmir Putin has long envisioned the creation of a gold-backed alternative to the dollar, and last week he had a chance to push his agenda.  At a three-day economic summit, which included the latest gathering of the BRICS group of emerging economies – Brazil, Russia, India, China and South Africa – Putin shared his vision for a BRICS currency.  Egypt, Ethiopia, Iran, the United Arab Emirates, Turkey, Pakistan, Thailand, Venezuela, Senegal and Saudi Arabia are seen as potential members.

At the Summit, Putin showed a symbolic banknote, “The Unit” featuring the flags of BRICS countries.

Even if the BRICS members and their partners never find a way to circumvent the dollar, no one stocking up on gold appears to be losing money at this time.

MARKET UPDATE

S&P 500

Uptrend intact. Could be a volatile week with Big Tech earnings out and the Jobs Report.

Next Target: ~$5,900

Support: ~$5750/$5720

GOLD

Rally set to continue after time correction. 

Next Targets: $2765/$2850

BITCOIN

Bullish structure still intact. 

Next Targets:  $72,560/$75,240/$81,340

QI CORNER

SOMETHING TO THINK ABOUT

Cheers

Jacquie

(THE AUSSIE OUTBACK IS BEING PREPARED FOR WAR WITH CHINA)

October 23, 2024

Hello everyone

A little-known airbase in the middle of nowhere in outback Australia is being prepared by American/Australian forces for an all-out war with China.  If this event comes to pass, RAAF Base Tindal will play a central role.

Ever heard of the novel We of the Never Never? The location of the novel and this Airbase are one and the same.  About 300km south of Darwin, near the town of Katharine in the Northern Territory, a small army is preparing the formerly unmanned army base for the arrival of B-52 bombers capable of carrying nuclear weapons and, later, for American stealth bombers. 

The runway has been extended to handle the West’s biggest military aircraft.  Fuel bunkers full of millions of liters of jet fuel are complete. Submerged bunkers are loaded with computer equipment.  Dormitories with hundreds of beds are in place.  Additionally, underground power systems backed up by large Rolls Royce-made emergency generators costing millions will increase resilience if there is an attack.  Construction is ongoing at the Base so that six B-52’s can be parked.

Several of Australia’s F-35A stealth jet fighters – which will eventually be 72 – are already based at Tindal.  The Australian Air Force Wing Commander Fiona Pearce said that “We’re going to be big enough to take any aircraft in the world and to park and fly every different variant of aircraft.”

Michael McCaul, chairman of the US House of Representatives, described Australia as “the central base of operations” for America’s military to confront Chinese aggression in the Indo-Pacific.

Paul Dibb, emeritus professor of strategic studies at the Australian National University, said that the military build-up in Australia was Washington’s insurance policy.

It will not only be 1950’s-era B52 bombers that will operate out of Tindal.  The rapid upgrades to the base will also accommodate the US B-2 stealth heavy bomber and its long-range replacement, the B-21, which made its maiden flight last year.

The American military build-up is becoming obvious to the residents of Darwin.  US Marine Osprey aircraft operated by US Marines housed in the tropical city have become a familiar sound.  In addition, the sight of a US fuel dump dominates the skyline.

Not everybody is happy about this defense build-up.  Some former Australian politicians are scathing of the build-up and have expressed anger at the fact that Australia would be targeted in a war between the U.S. and China.  Also, the Australian public has been mostly uninformed about this strategic development.

Elisabeth Clark, the mayor of Katherine, said: “With China and everything else, you just don’t know what’s going to happen.  I think people are aware we are now a target.”

QI CORNER

SOMETHING TO THINK ABOUT

Cheers

Jacquie

(POWER PRODUCERS WILL BE ONE OF THE BIG INVESTMENTS OF THE FUTURE)

October 18, 2024

Hello everyone.

The bullish argument for nuclear power generation.

Vistra (VST) $127.27, Constellation Energy (CEG) $271.20, Talen Energy (TLN)$171.68, Cameco Corp. (CCJ)$56.67

There are strong trends in both energy supply and demand that support the fundamentals of existing nuclear power producers.

Beginning with the supply argument, nuclear power plants are a highly valuable and scarce asset.

Nuclear power plants are valuable because nuclear is the only source of carbon-free energy that is reliable enough to be considered "base load energy." Other sources of reliable energy are either dirty (fossil fuels), are not yet reliable (solar, wind), or are not abundant (hydro, geothermal).

The US has agreed to phase out coal and other dirty power sources over time. Coal used to account for one-third of power generation but now accounts for roughly 10%. This supply gap has largely been filled by natural gas and crude oil (see below chart). Nuclear was previously vilified as a dangerous source of electricity; however, politicians on both sides have become much more pro-nuclear in recent years as an increasingly attractive alternative. This has led to several nuclear plant extensions, talks of restarts, and new tax incentives. 

Nuclear power is scarce because it is extremely costly and timely to build. Almost all US nuclear reactors were built between 1967 and 1990. Regulatory costs skyrocketed after the Three Mile Island accident in 1979. The Vogtle electric plant in Georgia was the only new nuclear plant added in the last 30 years. Vogtle took 15 years and $30 billion to build. Nuclear power plants just aren't economically viable relative to the cost of building new natural gas plants. However, this makes existing plants, like the one Talen owns, more valuable.

Moving on to the demand argument, electricity demand growth is accelerating as the US adopts electric cars and builds more data centers.

Electricity demand has historically grown in line with population growth; however, recent technology shifts have accelerated the demand on the grid. Artificial intelligence applications are more compute-intensive and, therefore, require more electricity. For example, ChatGPT uses as much as 30x more electricity per query than Google search. Research from the Boston Consulting Group projects data center energy use in the US will 3x from 130 terawatt hours in 2022 to 390 terawatt hours by 2030.

JPMorgan analysts are seeing “structural tailwinds, including manufacturing onshoring, broader electrification trends (transportation, heating, and more), as well as data center development underpinning a paradigm shift in power demand.”

Additionally, analysts see that with half of its gas generation in the Texas ERCOT grid, Vistra can also help fill a potential 40-gigawatt supply gap in the Lone Star State by 20230.

Vistra (VST) is JPMorgan’s top pick, with a price target of $178. 

Vistra Energy (VST) Daily Chart

Constellation Energy (CEG) is another favourite of JPMorgan in this sector, and the investment bank believes Constellation’s industry-leading nuclear fleet is well-positioned to continue capturing long-term power contracts with data centre developers at premium prices.  Its decision to restart Three Mile Island after signing a power purchase agreement with Microsoft was an industry milestone.

JPMorgan’s price target for Constellation is $342.

Constellation Energy (CEG) Daily chart

Finally, JPMorgan analysts see Talen’s multidecade agreement with Amazon Web Services to power a data centre campus with electricity generated at the Susquehanna nuclear plant in Pennsylvania could help send the stock higher if it delivers the full 960 megawatts of power to AWS.

Over the next 10 years, AWS has contracted to purchase as much as 1 gigawatt of power per year for a price nearly double the rate of the wholesale power price. Amazon is willing to pay a premium to source reliable carbon-free energy for a large data center, and it will also benefit from certain tax credits associated with the project.

Finally, there may be additional opportunities for per-share value growth above and beyond the AWS deal.  Talen believes there are additional opportunities to co-locate data centers next to its other power plants. Talen's capital allocation strategy of creatively monetizing existing assets while returning capital to shareholders should continue to work.

It is important to remember that there is a wide moat around the business simply because a new nuclear power plant of Susquehanna's scale cannot be replicated at a cost anywhere near the current enterprise value of Talen. 

JPMorgan’s price target for Talen is $268.

Talen Energy (TLN)

Cameco Corp. (CCJ) is a great nuclear power play stock to own for the long term, too.  I have been recommending this stock since early 2024.

Cameco Corp. (CCJ) Daily Chart

I would recommend owning at least two of the power produces illustrated here.  Scaling in is the strategy you should use. 

Earnings Results

Netflix:  Earnings yesterday beat on the top and bottom lines.  Ad-tier memberships jumped 35% quarter over quarter.  Revenue for the full year of 2025 is expected to be between $43 billion and $44 billion.  Advertising is expected to become a primary growth driver from 2026 onwards.

I recommended Netflix on January 17, 2024, when it was $480.00.  I also recommended you either start scaling into the stock or add weight in Jacquie’s Post on October 10.

Goldman Sachs (GS) and JPMorgan (JPM) also reported great earnings.  I also recommended these stocks, or to add weight if you held them, in Jacquie’s Post on October 10.

QI CORNER

SOMETHING TO THINK ABOUT

TRIVIA CORNER

1. Which country has the longest coastline?
2. Who was the first U.S. billionaire?
3. Which first lady was the first to appear on U.S. currency?

Answers in Monday’s Post.

Cheers

Jacquie