The price of gold has gone up 85.56% in the past 12 months—it currently sits at over $5,100 on the Comex continuous contract—so if you bought some a year ago, you are probably pretty happy.
But if you are a jewelry maker or retailer who needs to buy gold repeatedly as part of your manufacturing operations, you’ve got a logistical headache. You can wait until all your current inventory has been sold and then use that cash to buy more gold for new products. But that takes time, and while you are waiting the price of gold may move against you.
Or you can do what jewelry companies actually do, which is to constantly borrow a supply of physical gold on the promise that what is owed back is that same amount of gold, not its dollar value. The cost of carrying this borrowed gold are the interest payments on the loan. But because the debt is the physical gold, and not its ever-changing dollar value, the jeweler can reduce its exposure to negative price changes in favor of only being exposed to the interest payments.
This, of course, is its own logistical headache. But some crypto companies—Theo, Libeara, and Falcon Finance, in particular—think they have created a solution that will make investing in gold even more attractive.
