Goldex, the first multi-dealer marketplace for allocated physical gold, today announced that it has launched a bespoke trading infrastructure to service other companies and institutions.
Thanks to a “plug-and-play” integration system, FinTechs and other financial companies can piggy-back on Goldex’s technology. Such companies can buy, sell and store gold via the first multi-dealer marketplace that not only solves liquidity issues but also acts as a price-discovery tool. Goldex’s technology is geared up for companies to successfully launch and deploy the new product in a matter of weeks, making it the most cost-effective solution to date.
The move comes in response to fierce competition within the FinTech industry. A multitude of new players entering the space forces financial start-ups to constantly expand into new verticals, products and solutions in order to attract and retain customers. Goldex acts as a behind-the-scenes fully integrated solution that allows them to keep control of their branding and customer experience.
And the timing could not be better given the upcoming Basel III requirements.
Set against a backdrop of soaring demand for physical gold - consumer demand grew 40% in 2020 (World Gold Council) - the Basel III regulatory laws come into effect on June 28th and will only boost appetite for the metal. The Basel III accord is a set of global financial reforms that aims to ensure banks have sufficient capital and liquidity, but less leverage, in order to withstand economic shocks.
The new rules have significant implications for banks, bullion dealers and other financial institutions that trade in unallocated gold. Often called “balance-sheet gold”, unallocated gold offers exposure to gold prices but does not provide legal ownership of the metal to the buyer. Until now, banks did not have any capital requirements but, under Basel III, they will be required to put up to 85% of the value of their unallocated gold positions in cash or equivalent. The jump is significant as previously the requirement was 0%.
Basel III might produce shockwaves in the gold industry. It is expected that unallocated gold will be exponentially more expensive as banks will need to finance 85% of their trading positions. It is also expected that the move will force banks and other business to shut down their operations as they will no longer be economical to run. In turn, the unallocated market might suffer liquidity issues as supply drops and costs increase.
The fear is that these issues could have a knock-on effect in the allocated physical gold market.
If the focus and attention of gold trading shifts towards allocated physical gold, it could result in increased demand that squeezes liquidity and sends gold prices soaring. We cannot forget that physical gold is finite and cannot be printed at will. As a result, smarter allocated gold trading solutions that offer easy access to multi-liquidity venues and best-price discovery tools might end up being the winners of the changes that are about to hit the gold industry.
“We know the changes and pressures that FinTech companies face in diversifying into new products - let’s not forget that we are a FinTech start-up too. Of course, Basel III has been in the cards for a very long time and it has not come as a surprise. Over the last 18 months we have designed and developed the ultimate solution for B2B and B2B2C companies to be able to compete within their industry and at a time when the gold landscape is changing. Being the first to market is always a competitive advantage and we are excited to be in this privileged position” said Sylvia Carrasco, CEO of Goldex.
Launched in the UK in 2018 as a mobile app, Goldex gained a loyal following among traditional investors and thousands of digital-savvy consumers previously shut out from buying and selling gold at the best prices. The marketplace technology was built to grant such access whilst also improving consumer trust in gold quality and dealer reputability. Now they’ve evolved their technology for the much larger business-to-business market.