A legendary gold bug is going digital.
Eric Sprott, a billionaire investor in precious metal miners and bullion, his family company and long-time colleague Peter Grosskopf are teaming up with cryptocurrency entrepreneurs to launch Argo Digital Gold Ltd., a platform designed to give a new generation of investors a way to own physical gold.
Toronto-based Argo will compete with existing bullion funds, including products offered by Mr. Sprott’s former company Sprott Inc. SII-T, which manages $28.7-billion. Mr. Sprott retired from the company in 2017 and now backs his daughter Larisa Sprott in a precious metal sales and storage business called Sprott Money Inc.
Argo will differentiate its products by offering 24-hour-a-day trading, lower fees and fractional ownership in gold bars stored in the Royal Canadian Mint. Most existing gold-based securities are exchange-traded funds (ETFs), which can only be bought or sold when stock markets are open.
“This digital platform will make precious metals more accessible to a younger, more tech-savvy generation of investors who want to own and store gold,” said Ms. Sprott, president of Sprott Money and an Argo board member, in a press release.
Argo’s products, such as cryptocurrencies, will be outside the traditional financial ecosystem of banks, stock exchanges and investment dealers.
“Why own gold within the financial system when you are buying gold to offset the risk of failures in the financial system?” said Mr. Grosskopf, chair of Argo, in an interview.
Argo has been building its systems and working with regulators for the past year and Mr. Grosskopf said the company plans to launch products by this summer. It plans to market its concept to gold miners and other industry players at the annual Prospectors & Developers Association of Canada conference in Toronto this week.
Mr. Grosskopf served as chief executive officer at Sprott Inc. for 12 years, then spun out the company’s mining-focused investment dealer division in 2023, branding it as SCP Resource Finance LP. Mr. Grosskopf, now CEO of SCP Resource Finance, said: ”It’s great to be back in partnership with Eric Sprott.”
When Mr. Sprott founded his eponymous asset manager in 1981, he pioneered an industry that offers investors ownership in exchange-traded securities backed by physical gold and other precious metals such as silver and platinum. Investors currently hold US$210-billion in gold ETFs, according to the World Gold Council, an industry association backed by 32 mining companies.
The sector’s largest ETFs include the New York Stock Exchange-listed SPDR Gold Shares, which represents US$54.3-billion in bullion, and Sprott Inc.’s flagship $6.5-billion physical gold trust, which also stores its gold at the Royal Canadian Mint.
Argo’s executive team includes president Michael Petch, who previously launched digital gold products backed by bullion in Swiss bank vaults while working at CoinShares International Ltd. CNSRF In an interview, Mr. Petch said the combination of cryptocurrency markets, blockchain technology and bullion “marks a moment of inflection for the gold industry.”
“The tokenization of gold gives the sector an opportunity to do a better job of marketing gold to investors,” said Mr. Petch. He said over time Argo will introduce additional products backed by other precious metals such as silver. The company also plans to secure storage space in other vaults, in addition to the Ottawa-based Canadian mint.
Along with the Sprott family and Mr. Grosskopf, Argo’s investors include Robbie Pryde, former vice-chair and head of global equities at TD Securities, the investment dealer arm of Toronto-Dominion Bank TD-T.
One of the world’s largest banks, HSBC Holdings PLC HSBC-N, also plans to launch a digital gold product this year. Each HSBC gold token will be equivalent to 0.001 troy ounce of the precious metal, which in turn would be part of 400-troy-ounce gold bars held in its vaults.
When the London-based bank announced the project in November, HSBC global head of digital asset strategy John O’Neill said in a press release the product reflected demand from investors who want “real-world“ assets such as gold linked to tokens in addition to “native digital assets” such as cryptocurrencies.
In 2022, the World Gold Council and the London Bullion Market Association joined forces on a project aimed at ensuring the integrity of the industry, including measures to verify gold bars are genuine and responsibly sourced. The initiative, branded as Gold247, is also developing ledger blockchain technology to provide a secure digital supply chain for the gold industry.