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Palantir’s Gold Purchase: Will the Golden Goose Lay a Crypto Egg Next?

  • Palantir bought $50 million worth of gold bars in August.
  • Crypto community questions Palantir: Why not cryptocurrencies?
  • Gold is outperforming other assets during lockdowns.

While some companies like to diversify into Bitcoin, data analytics software company Palantir invested in gold. The company recently announced in its latest earnings release that it bought $50 million worth of gold bars.

Palantir Technologies is a public American software company that specializes in big data analytics.This major move left many wondering, why not crypto instead of gold?

The company’s decision to invest in gold is indicative of a growing company stashing cash in an unconventional asset in response to economic uncertainty triggered by the coronavirus pandemic and governments’ responses to it.

Gold Is Not Dead

The famous William Shakespeare quote reads,

“Gold—what can it not do, and undo?”  

Gold has been one of the best-performing assets since 2020. As the pandemic and lockdown of entire economies plunge debt-laden economies into financial and economic crises and stock markets plummet, gold is up 16.5% in dollars, 21% in euros, 25% in pounds, and more in other currencies.

The price of an ounce of gold topped $2,000 for the first time last year as the pandemic worsened and U.S. government stimulus programs continued.

This year, investors are speaking out about their inflation concerns. 

Gold was used as a hedge against inflation, even though prices have decreased 7% this year. 

Thus, Palantir’s preference to purchase gold bars seems to be fairly intelligible.

However, there’s still a chance that Palantir could expand into the cryptocurrency space after investing in gold. David Glazer, when asked by an analyst back in May whether the company might have Bitcoin or other cryptocurrencies on its balance sheet, said: 

"The short answer is yes, we're thinking about it, and we've even discussed internally."

DailyCoin reached out to Palantir for additional comments but did not receive a response by press time.

Why Crypto May Not Be Worthy

There could be several reasons why Palantir chose to buy gold. Everyone is no doubt aware that crypto is a volatile market. Therefore, crypto exchanges are not necessarily the preferred investment option for everyone.

Unregulated and Exposed to Unscrupulous Behaviour

Unfortunately, cryptocurrencies can be exploited by criminals, who can use cryptos as a means to defraud unwary investors. It could be one of the reasons why central banks and regulators are so keen to get involved. 

Of course, there are legitimate ways and means to invest in cryptos, but the lack of regulation makes them an attractive playground for less law-abiding members of society.

High Volatility, Large Potential Losses

Investors need to be aware that the potential for significant gains is offset to some extent by the possibility of substantial losses; the timing of an investment in Bitcoin or other cryptocurrencies will have a considerable impact on the returns achieved. 

On January 11, 2021, the UK website Financial Conduct Authority warned investors in cryptocurrencies that they should be prepared to lose all their money, as it is a highly speculative asset class. 

A few days later, ECB President Christine Lagarde also referred to Bitcoin as a speculative asset and called on central banks to regulate the cryptocurrency to prevent its use for money laundering activities.

Poor Store of Value due to Volatility and Restricted Usage

The supply of cryptocurrencies is potentially unlimited. Bitcoin is currently the most popular cryptocurrency, but fashions and tastes can change over time, potentially very quickly and for an unlimited supply of cryptocurrencies in general. 

And this could happen for no apparent reason. It is possible that once the Bitcoin supply limit is reached, there will be flows into other cryptocurrencies, causing Bitcoin to fall out of favor. 

This is not a prediction, but merely an indication of how the dynamics of the cryptocurrency market could change.

On The Flipside

  • Not only can investments rise and fall, but liquidity conditions can also change, causing a delay in market exits. 
  • Gold is an unregulated investment and is not covered under the Investor Compensation Scheme. Bullions operate best as part of a diversified portfolio of assets and should be held for a minimum of five years or longer.

Why You Should Care?

High-profile companies can influence other investors’ decisions and therefore affect the crypto market. Since cryptocurrencies are a volatile market, Palatir’s purchase of $50 million worth of gold bars indicates its preference, which could change traders’ behaviour.

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    This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

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