Continuing our series of blogs about new business ideas for business people to ponder during the summer holiday break we have a guest contribution from Alasdair Macleod, Head of Research at GoldMoney, a leading provider of precious metals for investors. They recently launched a pre-loaded payment card using gold as a digital currency based on the unit value of gold bullion as an alternative payment method.
How GoldMoney’s preloaded card works
By Alasdair Macleod
At GoldMoney, we have noticed that account-holders sell gold to preload their cards when gold rises. This makes sense. People are using their accounts as money, which is exactly what they should be doing.
A Gold backed card compliments a conventional debit or credit card based on fiat currency as it gives users the option of using it for day-to-day payments, as well as taking advantage of currency fluctuations.
Let’s assume you plan to take someone out to dinner. Beforehand, you look at the price of gold. If it is up, measured in your normal currency, preloading your card in order to pay for your dinner will make it less costly than using your normal bank card, compared with yesterday. If the gold price is down, you just use your bank card. In other words, you use the money that gives you the best deal.
This is the point about money. It is not an investment, so computing what you initially paid for gold and your profit or loss on it is not the point. You have to look at it as a competing form of money, which can give you an economic benefit.
As a user myself, I am certainly benefiting from this dual-money approach to spending.
My experience of gold versus sterling is a good illustration of why it works so well.
About four months ago, I planned a trip to Canada, which, it so happened, was to be at the same time as the British referendum on leaving the EU. I paid for the flights, hotels and car hire several months ahead. That left the issue of spending money, about which I did nothing, other than to ensure I had adequate funds in both my GoldMoney and regular bank accounts.
Before the vote, sterling was strong, which impacted negatively on the purchasing power of gold measured in sterling, so I drew down on my regular bank debit card to pay for local expenses in Canada. Then came the surprise vote for Brexit, and the gold price, measured in sterling, took off like a scalded cat.
The sterling rate for Canadian dollars was also trashed, but I still had my gold, which actually bought significantly more than before, even measured in Canadian dollars. From that time, I used my GoldMoney card for local expenses. So instead of worrying about the collapse in sterling, I continued to enjoy my stay in Canada by using gold.
I could, of course, have taken out a travel company’s pre-loaded card, and bought my Canadian dollars well in advance. By locking in the rate, I would have had the advantage of certainty, but lost the flexibility gained by using gold as a rival form of money. In the event, I was far better off retaining that flexibility.
I share this experience with my readers as a lesson for us all.