The previous article covered bonds, an asset that is somebody else's liability. Precious metals are the exact opposite: nobody owes them to anyone. That is why gold has been used for thousands of years wherever trust breaks down. This article covers where that function came from, why there was no point investing in gold under the gold standard, what bitcoin has inherited from it and what it still lacks.
What precious metals are
Precious metals are metals that are rare in the earth's crust, chemically stable and hard to counterfeit. Four of them have their own exchange codes and their own market.
| Metal | Main use | Annual mine output |
|---|---|---|
| Gold | Store of value, central bank reserves, jewellery | around 3,600 tonnes |
| Silver | Industry (solar, electronics), partly investment | around 25,000 tonnes |
| Platinum | Industry, catalytic converters, jewellery | around 180 tonnes |
| Palladium | Almost entirely automotive catalytic converters | around 190 tonnes |
What separates them is what drives their price. Silver, platinum and palladium are primarily industrial inputs and their prices hang on the industrial cycle. If cars are not selling, palladium falls. Gold is the opposite case: industry consumes only a fraction of it and almost all the gold ever mined still exists, sitting in vaults and jewellery boxes. The rest of this article is therefore mostly about gold.
Six thousand years in brief
Gold was already being worked in the fourth millennium BC, first as a temple and burial metal. It appears as money in the seventh century BC in Lydia, in what is now Turkey, where the first coins were struck from electrum, a natural gold and silver alloy. From that point on the gold coin outlived every empire that minted it.
The reason is practical. Gold does not corrode, it can be divided and recast without loss of value, its purity can be verified and it cannot be manufactured. A coin can only be debased one way: by mixing in a cheaper metal. Rulers from Rome onwards did exactly that, and it is the oldest recorded form of inflation.
The gold standard: the era when investing in gold made no sense
In the eighteenth and nineteenth centuries gold moved from the mint into central banks. As Master of the Royal Mint, Isaac Newton set the ratio between gold and the pound in 1717 in a way that put Britain on a de facto gold standard, formalised in 1821. Between 1870 and 1914 the classical gold standard tied the major currencies to each other through a fixed gold price. The United States held the gold price at 20.67 dollars an ounce from 1834 all the way to 1933.
Here is the detail that is easy to miss today: under the gold standard there was no reason to invest in gold. Its price was not set by the market but by statute. Swapping a hundred pounds for gold did not buy you a different asset, only a different physical form of the same hundred pounds. Gold also paid no yield, while a bank deposit did. Holding gold meant holding cash in a less convenient form, without interest and with storage costs attached.
It later got stricter still. In 1933 Executive Order 6102 banned US citizens from holding monetary gold, and in 1934 the price was set at 35 dollars an ounce. The Bretton Woods system of 1944 built the entire post-war monetary architecture on that price: the dollar was convertible into gold and other currencies were pegged to the dollar. Gold was the anchor of the system, not an investment within it.
15 August 1971: the gold market is born
US gold reserves could no longer cover the dollars in circulation, and on 15 August 1971 President Nixon suspended the convertibility of the dollar into gold. The gold price was released and, for the first time in history, set by the market.
The consequences came quickly. From 35 dollars an ounce the price reached 850 dollars in January 1980. Americans were allowed to own gold again from 31 December 1974, and gold futures launched on COMEX a few weeks later. The first exchange traded gold products only arrived in 2003 and 2004, letting ordinary investors hold gold without a vault. Gold as an investment class has a precise date of birth and is younger than most of the people buying it today.
Why gold is used as a hedge
A hedge is an asset held not for its return but for how it behaves when everything else fails. Gold plays that role for four reasons.
It is nobody's liability. A bond is a state's promise, a deposit is a bank's promise, a share is a stake in a company. A gold bar is nobody's promise. It has no counterparty that can fail and it cannot be frozen by another country's decision.
Supply grows slowly and nobody decides it. Roughly 220,000 tonnes of gold have been mined in all of history, and annual output adds about one and a half percent to that. No institution can increase the quantity of gold by decision, unlike money or bonds.
It has a tested record in crises. Gold has survived two world wars, the collapse of monetary systems and hyperinflations, and kept its purchasing power through all of them. That is not theory but centuries of data.
It is bought by those who have to plan for the worst case. Central banks have been net buyers of gold every year since 2010. The record was 2022 with 1,136 tonnes; 2025 came in at 863 tonnes, the fourth largest annual total on record. The biggest buyer was Poland with 102 tonnes, now holding 28 % of its reserves in gold. The National Bank of Slovakia owns 31.694 tonnes, held at the Bank of England.
Gold has limits too, and it is fair to state them. It pays no yield, storage costs money, and in an acute panic it falls with everything else, because it sells quickly and people sell what they can. Between 1980 and 2000 gold lost a large part of its value in real terms. A hedge is not the same thing as a return-generating investment.
How gold is held today
| Form | What you actually hold | Main risk |
|---|---|---|
| Physical bars and coins | The metal itself | Storage, theft, buy-sell spread |
| Gold ETCs | A debt security backed by vaulted metal | Issuer, management fee |
| Gold futures | A derivative position | Leverage, contract rolling |
| Miner shares | A stake in a company | Operational and political risk of mines |
| Tokenised gold | A token with a claim on metal at a custodian | Issuer, custodian, technology |
The structure of exchange traded products is covered in more detail in the article on the differences between ETFs, ETCs and ETNs. For this topic one note is enough: only the first row is gold without a counterparty. Everything else is a claim against somebody holding the metal for you.
Why bitcoin is called digital gold
The comparison is not marketing shorthand, it rests on specific properties. Bitcoin has a hard cap of 21 million units, its issuance roughly halves at every halving and now adds under one percent a year. Nobody can change that schedule unilaterally. Authenticity can be verified by anyone within seconds, unlike a gold bar that has to be drilled. And value can be moved across a border without physical transport, which gold has never managed.
| Gold | Bitcoin | |
|---|---|---|
| Supply cap | None, mining continues | 21 million, fixed |
| Annual supply growth | around 1.5 % | under 1 %, falling |
| Verification | Laboratory | Instant, by anyone |
| Cross-border transfer | Physical shipment | Network transaction |
| Market history | free price since 1971 | since 2009 |
| In official reserves | Yes, worldwide | Not yet |
Why it is not digital gold yet
On properties, bitcoin is close to gold. On behaviour it is not, and behaviour is what decides whether an asset works as a hedge.
Volatility is still several times higher. Gold has long moved in a volatility band of roughly 15 to 20 % a year; bitcoin sits at a multiple of that. An asset that can lose a third of its value in six months is hard to use as the thing that holds a portfolio together.
Under stress it moves with risk assets, not against them. The last two years are a textbook illustration. Gold gained 64 % in 2025, its strongest year since 1979, broke 5,000 dollars an ounce in February 2026 and trades around 4,380 dollars in September 2026. Bitcoin spent the same period well below its highs, reached 58,000 dollars in June 2026 and traded around 81,000 dollars in mid-September 2026. When the market got scared, capital went into gold.
It is not in official reserves. This is the hardest difference. In late 2025 gold overtook US Treasuries as the world's largest reserve asset. No central bank holds bitcoin as a reserve. The furthest anyone has gone is the Czech National Bank, which in November 2025 bought a one million dollar test portfolio of digital assets, held outside its official reserves. Following an analysis in February 2026, its board decided not to include bitcoin in official foreign exchange reserves for now.
It has been around a short time. Gold has millennia behind it and over fifty years of a free market. Bitcoin has seventeen years and not a single classic recession with rising unemployment in which to show how it behaves.
Most holdings today are not counterparty-free. The claim that bitcoin is nobody's liability only holds for someone holding their own keys. Anyone holding it through an exchange or an exchange traded product holds a claim against an issuer, which is exactly the counterparty risk a hedge is supposed to protect against.
For scale: bitcoin's market value was around 1.6 trillion dollars in September 2026, while the privately held investment pool of gold alone is estimated at roughly 8 trillion, and all the gold ever mined at a multiple of that.
When it could become digital gold
The question is not whether bitcoin replaces gold. It is whether it learns to behave like a hedge. That can be tracked through five things that are measurable and require no belief.
- Volatility falls towards gold's band. Every halving and every cycle has historically lowered it. As long as volatility is a multiple of gold's, bitcoin behaves as a risk asset.
- It passes through at least one recession against the market. A single stress scenario in which equities fall and bitcoin does not would do more for its standing than ten years of appreciation.
- It appears in official reserves. Not a test portfolio, but a real allocation by several central banks. The Czech case shows the debate is already being held at monetary authority level.
- Regulatory and accounting normalisation. Clear rules for custody, valuation and reporting, which gold has and bitcoin is only gradually acquiring.
- Generational transfer of holdings. Gold is inherited; bitcoin is still mostly traded. An asset becomes a hedge when people hold it without intending to sell.
None of that is a forecast. They are conditions, and they may or may not be met.
How this is taxed in Slovakia
Here is the part that surprises most people. For a Slovak individual, gold and bitcoin sit at opposite ends of the tax spectrum, even though both are bought for the same reason.
| Form | Income tax for an individual | VAT on purchase |
|---|---|---|
| Physical investment gold | Exempt, section 9(1)(c) | 0 %, section 67 of the VAT Act |
| Physical silver, platinum, palladium | Exempt, section 9(1)(c) | 23 % |
| Gold ETCs on a regulated market | 0 % after one year, section 9(1)(k) | None |
| Tokenised gold | Crypto-asset, section 8, no holding period test | None |
| Bitcoin held directly | Crypto-asset, section 8, no holding period test | None |
Physical gold is a movable thing, and income from the sale of a movable thing is exempt under section 9(1)(c) of the Income Tax Act, provided the item was not part of business assets. No holding period test, no contributions. Investment gold is also exempt from VAT under section 67 of the VAT Act, meaning bars of at least 995 thousandths fineness and coins meeting the statutory criteria. Silver and platinum have no such exemption and carry 23 % VAT on purchase, which the investor does not recover on sale.
Bitcoin is a crypto-asset under section 2(ai) of the Income Tax Act. Its sale falls under other income in section 8, has no holding period test, and once progressive rates and 16 % health contributions are applied the combined burden can approach 51 %.
And now the paradox. Tokenised gold, a token backed by real metal in a vault, is a crypto-asset under Slovak law, not metal. The same gram of gold is therefore tax exempt in a vault and taxed like bitcoin in token form. It is not the metal that makes the difference but the form of holding.
What to take from this
Gold was not an investment while its price was fixed by law, and became one only when the monetary system stopped standing on it. Its role as a hedge comes from being nobody's liability, from supply that grows slowly, and from being bought in crises by those who cannot afford to be wrong. Bitcoin has the first two properties. The third is still missing.
It has therefore not become digital gold yet, even though it is the closest thing in existence. What decides the question is behaviour in the next major crisis, not a debate about properties. In Slovakia there is a practical dimension on top: the same motivation to buy means zero tax on the metal and a burden approaching half the gain on the crypto-asset.
This article is a general overview, not individual tax advice, and not an investment recommendation. Assessing whether a specific form of holding falls under an exemption, and preparing returns involving crypto-assets, are part of the routine work kryptotax.sk does for clients. 🇸🇰