A New Way to Hold Gold (2015 Update)

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What if you could carry and exchange gold in the exact same manner as you do with the dollar bills in your wallet?

Last year, we introduced the precious metals community to a company called Valaurum, which has developed a technology that's making this possible.

Here's the write-up from last year:

Democratizing Gold

In short, a fractional gram's worth of gold is affixed to layers of polyester, creating a note – called an "Aurum" – similar in dimension and thickness to a U.S. dollar bill. This gold (usually 1/10th or 1/20th of a gram) is commercially recoverable. So an Aurum offers similar potential as a coin or bar, in terms of providing a vehicle for storing and exchanging known, dependable increments of precious metals – just in much smaller (and more affordable) amounts than commercially available to date.

The big idea here? In a world where a 1oz coin of gold costs over $1,200, an Aurum will let you hold a few dollars' worth of gold in a single note. If you've got pocket change, you can be a precious metals owner.

And you don't have to change your behavior. You can store and transport an Aurum in your billfold along with your dollars.

Understanding the Aurum

As the saying goes, a picture's worth a thousand words. Here's a picture of an Aurum designed for Peak Prosperity that the Valaurum team produced for us:

You'll see that with even just 1/20th of a gram of gold involved, it's enough to make the Aurum appear to be "made of" gold. The characteristic luster, color, and shine of the 24-karat gold used is immediately apparent.

The Aurum is designed to be handled in the same manner as we do with our "paper" money. And, despite having a more 'plastic' feel to it (resulting from the polyester backing), it's as flexible, lightweight, and familiar-feeling as paper currency.

The big difference, of course, is that instead of being a claim on something else, it simply is what it is: a fractional gram of gold. It can be stored, traded, or melted down – just like a coin or bar.

Here's a brief video that gives an overview of the production process:

//www.youtube.com/embed/eKYxlmwrKQw

Implications

Being able to hold gold in this form is significant for several reasons. 

First, it makes gold ownership available to all budgets. Many of the world's households have been priced out of gold to date. This changes that completely.

Second, it enables the potential for everyday transactions should we ever return to a precious metal-backed monetary standard. It answers the challenge: How will you pay for your groceries with gold? With an Aurum, it's now easy.

Whether Valaurum's product emerges as the winning horse or not, the world definitely needs this type of solution (i.e., convenient fractional physical metal) to go mainstream. 

I'm very excited by this new innovation in the bullion industry, and I explore the matter in depth in this podcast. If you're similarly intrigued, it's worth the listen.

The response to last year's podcast was tremendous. It quickly became one of the most popular in Peak Prosperity's history. If the description above interests you, and you haven't listened to it already, you can do so by clicking here.

Big News

So, what's happened with the aurum over the past year? Has the concept caught on with precious metals investors?

We've invited Adam Trexler back to the program to find out. In this week's podcast, he shares with us a number of positive updates about adoption of the aurum, demand by the bullion dealer community, and product enhancement to the gold note itself.

But most exciting is this: a (small) sovereign central bank is deep in negotiations with Valaurum to replace its existing national currency with aurum notes, creating a true precious-metals backed monetary system. As best we know, this would make it the only one in existence in the world today.

If this indeed occurs, it could be a game-changer. Changes in trust and perception always begin with a non-conformist having the courage to depart from the herd's consensus. Even a small country rejecting fiat money in favor of a gold standard will catch the attention of others. And as the current currency wars exacerbate, as they inevitably will, more countries will increasingly look to adopt monetary regimes that work better. Perhaps that will be a return to gold, in this new form.

More Big News

The Peak Prosperity aurum notes we printed up last year quickly sold out. Demand was much higher than we had expected.

For those who did not have the chance to purchase any -- or for those who did, and are interested in collecting each new series that gets produced -- we have good news: the new 2015 Peak Prosperity aurum (1/10th gram) is now available for purchase. Those interested in doing so can learn more by clicking here.

And for those interested in the latest on Valaurum,  click the play button below to listen to my latest interview with Adam Trexler (31m:20s)

This is a companion discussion topic for the original entry at https://peakprosperity.com/a-new-way-to-hold-gold-2015-update/

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I've had one of the Aurum "bills" in my wallet for a year now.  I just checked it, it seems to be in pretty good shape.  I always intended to give it away as suggested by Adam (atom?), but it has stayed with me, though it has been the basis for many discussions.  I'll buy another dozen just for the novelty of it, and to support a new paradigm, even though the premium is pretty steep.  I've heard that "junk" silver- the only practical alternative- is getting hard to come by.  The 1/20th gram might be more easily "gifted"…Aloha, Steve.

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My brother had once tried to make pretty artwork "plaudet" bills, to accompany cash transfers, as a way of creating an anti-depression "wooden nickel".  It didn't work terribly well, but I had suggested electroplating PMs onto it.
Now I see that – yes – it has been done.  Good to see it. 

It's also clear to me that this was raised as an independent idea, possibly before my own voicing of it.  That then implies to me that my idea was moderately good:  probably fifty to 100 people thought of it, and one was able to carry it out.  Again, it's good to see it happened.

 

 

 

4

Junk silver isn't the only practical alternative. Shire Silver has actually been around longer and not only matches the Valaurum in having the smallest gold units at 1/20th gram, but we also have silver as small as a half gram.
I too have a valaurum in my wallet for over a year, and it has stood up very well, although I don't often handle it.

But whatever alternatives you choose to use, know that building up a network of people and businesses in your area that accept it is one of the best things you can do.

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I don't see how it can be easier to buy groceries with the Aurum than it is with my 1/10 ounce gold eagle, in either case the buyer and the seller have to know the current spot price of gold. If I were the seller I'd be more likely to accept a gold coin that I can see is metal, rather than a piece of plastic that I've never seen before. I do think it's a good idea for replacing gold backed money with very small gold content bills but it has a long way to go for acceptance by a grocery store. For me, spot price times 2.5 is much too expensive when I consider the markup on a 1/10th ounce gold coin.

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There's no way people are going to go back to using coins as money, no matter how much we fans of precious metals might wish it. They're just too inconvenient and cumbersome. That's why people preferred using bills (even if the backing was suspect) over coins. All during the 1800s people had the choice to use coins of gold and silver or paper notes, and they overwhelmingly chose paper. Heck, that's what allowed the fiat fiasco in the first place: people used the paper so much that they started thinking of the paper as the money, which allowed the banksters to pull off the switch.
And please don't confuse bullion with money. A one ounce gold coin, or even a tenth ounce coin, isn't money; its a commodity that can act as a store of wealth or a hedge. It doesn't have that utility that the Valaurum or Shire Silver has. By making the precious metal be in a form that people will actually use it adds tremendous value.

Think about this: do you complain to the restaurant that your salad costs more than the "spot price of lettuce"? Do you complain that your car costs more than the spot price of steel? A silicon chip costs a whole heck of a lot more than the sand it is made from. Heck, here on my desk there's a can of air - what's the markup on that?

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jones -
One big reason the Valaurum would be more convenient for everyday transactions than your coin is the much smaller gold content it represents. At today's $1200/ounce spot price, your 1/10th ounce coin contains $120 worth of gold (at spot, ignoring premium), whereas the gold value in a 1/10th or 1/20th gram aurum note is 30-60 times less = a few dollars worth (again, ignoring premium). Much easier for everyday purchases.

Second, the handling of an aurum note vs small bullion coins is night and day. As described in the podcast, an aurum note is pretty much the same dimensions as the currency notes we're all used to (several commenters have already mentioned they indeed carry them in their wallet). While there exist some gold bullion coins and wafers in 1 gram or 1/2 gram sizes, have you ever held one of them? They're tiny. Extremely easy to lose and very difficult to handle given how small they are.

Third, the premium over spot we pay (anywhere) for gold bullion goes up as size increments become smaller due to the relative amount of production cost per unit value. Look at the difference in premium-to-spot between a 1oz coin, a 1/10 oz coin, and a 1 gram coin, and you'll see this clearly. At fractional gram units, Valaurum's "double spot" pricing for us is actually quite good given the natural cost curve.

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The Aurum is obviously a very new concept and has a ways to go to gain a true foothold in minds and hearts of a critical mass of people.
But the idea is simple enough…creating money with intrinsic value that people can immediately relate to (because it is in a familiar bill form) skips over several important barriers to acceptance.

Until widespread acceptance happens I have found the Aurum to be an incredibly effective conversation starter.  When people handle one they immediately get that look in their eye, the same one as when I hand them a gold coin, which is a combination of cool! and hey I can tell this is real.

I've handed them out to people I consider to be important to sway, or who may influence others, and seen them in their possession a year later.  The point being, people hang onto them.  

Considering what's at stake, I regard $10 (or less) to be a cheap investment if I can reach someone who might otherwise be difficult to engage.  It's proven to be way more effective than handing them a book they may or may not read, and certainly won't carry around showing to other people.

The Aurum cuts right to the chase and contrasts starkly with existing currency in a way that is most unflattering for fiat currency.  That is, the Aurum physically represents a very powerful and important set of ideas.

If you don't know how to broach the wider Crash Course narrative with someone who is important to you, consider the Aurum.  It speaks for itself, and can lead to some great conversations…at roughly the cost of a single movie ticket.

9

I got a Peak Prosperity Aurum after the podcast last year and have been carrying it in my wallet ever since.It has been an interesting conversation piece and indeed may be a fungible, reasonably sized stable currency in the future with a real value not tied to any nation, central bank, etc.
For what it is worth, and taking into consideration that it was mentioned in the current podcast that production technology has improved, I just noticed, upon close examination that where the Aurum was folded in my wallet that it is delaminating, but none of the gold appears to be lost. Nothing like field testing.
Regardless, I still feel like it may be a very practical currency in the future.

10

I carry around a Valaurum note and a Queen Victoria Sovereign coin. They are both great conversation pieces. The nineteenth century coin causes more interest because of its obvious history. Many people find the sovereign absolutely fascinating, especially when we discuss how its purchasing power is essentially unchanged from the date it was coined.
Most people are easily convinced that gold is a good way to preserve wealth, but it is not so obvious how gold translates into credit (or debit) card transactions, which are the prevailing means of payment for retail purchases.

I know for a fact that my local bank carries very little in the way of banknotes on the premises. The vast majority of their business is in digital currency. How does Valaurum fit into that scenario?

11

I produced a £100 bank note and a £100 coin (gold brittania) asking them which, if they had the choice, one would they pick to spend. All three chose the bank note. 
Introducing the Valaurum at this point might cause much confusion. 

Its a work in progress.

12

Glad to see that you are returning to the aurum. The ones we have are like the first edition,rear is the word.Glad to here about South America, change is now coming!

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If the Aurum gets wide acceptance and use, may be we should expect lower premiums as manufacturing costs will be lower?
@Jones. Actually we speak about gold spot price because we use fiat currency. if we switch to gold as money, then I think gold spot price will be meaningless in everyday use as goods will be priced in this new money.

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My "Common Sense O'Meter" is going off. 250% over spot, someone is making money here and it ain't we little middle class folk. A rich mans' conversation piece I think. Glad you all are excited about the offer though.
We Middle and Lower Middle Class are trying to figure out how to bridge the gap between the issue these days of "more month than money". There are great "Buy, Sell, Trade" Facebook sites out there for us struggling people. Guess we have different conversations.

AK GrannyWGrit

 

15

Let's clear things up.
First off, the premium is not 250% over spot. If you buy less than 10 at today's prices, the premium you pay per aurum is 159% over spot. If you buy 10 or more, the premium you pay per aurum drops to 107% over spot.

Now, that still may seem like a lot. But as I commented earlier:

the premium over spot we pay (anywhere) for gold bullion goes up as size increments become smaller due to the relative amount of production cost per unit value. 
Now, let's look at the premiums for other small-increment bullion products. The premium-to-spot on the average 1 gram coin or wafer is 34%. For a 0.5 gram coin/wafer, the premium-to-spot jumps to 77%. So the premium jumps by 2x as the denomination is cut in half. Of course, this is an exponential process, not a linear one, so we should expect a 1/10th gram to have a premium substantially higher than twice 77%. With this math, the 159% premium-to-spot for the 1/10th gram aurum actually looks pretty good. And the 107% premium-to-spot price per aurum if you buy 10 or more looks extremely generous.

Bottom line: you do not buy very small-increment bullion products to get the best premium-to-spot price. If you're looking for that, buy 1oz Krugerrand coins or higher denominations of PAMF Suisse bars. Of course, you'll need to shell out at least $1,255+ at today's prices.

You buy very small-increment gold bullion products for the smaller value. Usually, as a hedge in case you ever want/need to use them to transact for everyday purchases.

Valaurum's aurums enable you to do that for transactions of <$10, the smallest of any provider that we're aware of. This is not a "rich man's" product. Quite the contrary. For just $10, nearly anyone can give themselves some piece of mind that, should there be a collapse of fiat currency, they'd hold a form of money that may still buy a meal (or more, as the relative value of gold would likely skyrocket in such a situation).

I challenge anyone here to find a superior offering at the extremely small increments that Valaurum offers (1/10 gram and 1/20 gram). By superior, I mean lower premiums, ease of handling, high product integrity and standardization, and anti-counterfeit protection. If you find one, I'd sure love to see it.

Simply put: if you're interested in having the ability to make very small price transactions using physical gold, do you have evidence of a better solution that this? I don't.

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Thanks for making that correction Adam.  Since I am not good at math I got that number from the link that says "click here" so it wasn't a calculation I made but one that was displayed. Fortunately that number has since been corrected.
This offering is novel, fun, and as stated above makes sense to many.  Unfortunately, belonging to a different cohort than most I would like to propose that in a SHTF scenario a lot of the people I know, and those in my demographic may not so eagerly accept an Aurum as payment much less know what one was, perhaps on a going forward basis that will change. They would make great gifts for the kids though.

I seem to be the loan skeptic here, sorry I couldn't provide unanimous enthusiasm but then being a curmudgeon runs in the family.

AK GrannyWGrit

 

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Just ordered a dozen; can't wait to hold them in my hands! Thanks for bringing this to us, Adam and Chris.

a (small) sovereign central bank is deep in negotiations with Valaurum to replace its existing national currency with aurum notes
Hmmm, could a drachma-laurum be on the horizon?? ;)
18

There is always a profit the government makes when they crank out currency, regardless of what its made from - or else the government stops using that thing, like they did with silver in the 1960s.  For large sections of the time when silver coins were minted, they were selling for perhaps 50% of spot.  Each Peace Dollar had 0.77 troy oz of silver.  It would have required silver at $1.30 for it to be properly priced as a bullion coin.  In fact, during the depths of the Depression, those Peace dollars contained only $0.24 in silver.
That's the difference between something being "legal tender" (i.e. even silver coins are part "fiat") and as such are worth more than melt value once declared legal tender by the government.

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Thanks for sharing all this information, Adam!
This will be a great gift to my three teenage kids - so I've completed an order for a batch to be sent to Sweden. My kids are only partly aware of my skepticism toward the current economic and monetary order. I believe this will be a tangible and memorable way of telling them something important about real money.

And I have no problem with the so called mark-up. The company adds value (and have considerable costs) through an innovative industrial process. Of course, they need to be compensated for those costs.

20

I'm with you on this one Granny.  I think it may be hard enough to get someone to take my difficult to counterfeit pre 1964 quarter,  I'm a little skeptical that the anyone is going to be very enthusiastic about transacting business with something that looks like an easily counterfeitable candy wrapper.  I must admit to a little bit of a "Do I look stupid?" reaction to the premium as well.  159% over spot for the hip, new, shiny, plastic, "Gee whiz" product or 3% over spot for grubby, pedestrian and oh, so last century, silver pocket change.  This country bumpkin is going to go with what's know to work a little bit longer, though I'll be watching with interest.
My 2 cents from the pucker brush, 

John G.