I'm looking at the Utah and Nevada goldback currency notes on APMEX. They seem like a brilliant idea, and a great way to secure some small sized precious metals for local bartering. Alaskans and many Alaskan companies already commonly accept precious metals, but typically at an exchange to verify and weigh them. With the USD looking at some obvious inflation to come, and the price of gold having not skyrocketed as it may in the months to come...I like the idea.

Has anyone invested in these notes? Does anyone here have practical reasons NOT to purchase some?

I appreciate y'alls thoughts.

Here's some pictures of the notes for those that have never heard of this. They are precious metal (gold) infused into the cloth of the notes, in the amounts indicated. They are legal currency in the states they are issued in, and accepted most places that accept precious metal coins.

No, I haven't invested in these notes and I don't think of myself as a guru.
That said, the thing I consider first with precious metals is the premium. The smaller the amount of metal per purchase the higher the premium in relation to it.

My guess is that most folks will be better served saving their money until they can buy in at least one ounce quantities. Not sure what market conditions would be required to change that significantly.

Remember, there will be a premium charged when you want to exchange it as well.

If there is no, or little market for them outside your state of residence, that is a whole 'nother kettle of fish.

quote:

If there is no, or little market for them outside your state of residence, that is a whole 'nother kettle of fish.

That is the real question. Will market participants accept these notes readily? I'm hoping perhaps some people have experience doing just that. I would not purchase these with the idea of exchanging them back to an exchange. I have bars for that purpose.

I think the biggest problem you are going to run into is that the general public has never heard of them before. I'm just learning about them now, and I would be hesitant to take them in exchange for anything.

When you buy gold, you pay spot plus a premium. When you sell gold, or use gold in a transaction, you typically get spot or a percentage under spot.

That value below spot goes down for less recognizable forms of gold, like generic bars and rounds, or these gold foil notes. Some dealers, and folks who are willing to accept precious metals during transactions, won't even touch less-recognizable forms. These goldbacks are not very recognizable.

The other issue with small denominations of gold is that as the denomination goes down, the premium you're paying to acquire it almost certainly increases, percentage-wise.

That 25 Goldback note contains 1/40th of an ounce of gold. At current spot, its gold is worth $46.17. Apmex sells the foil note for $89.16. That's almost a 93% premium. So you're paying roughly double what it's worth. Or to look at it another way, if you were to buy it and then try to sell it or use it in a transaction, you'd get half of what you paid.

Compare to something like a 1 oz gold eagle coin, which is worth $1846.80 at spot, and Apmex currently sells for $2006.79. That's about a 9% premium. And even that is 2x-3x higher premium than they usually cost, due to the current high demand. (3%-5% is more typical, in normal times.)

Yes, the value of gold will likely continue to rise, and could make up the cost of the premium over a long enough time. But it takes a whole lot less time to recover a 3% premium that you paid than it does to recover a 90% premium.


So no, I wouldn't bother with these goldbacks. If you want some gold or silver, stick to easily recognizable coins like American Eagles, Maples Leafs, etc. They're available in fractional denominations down to 1/10 oz, but the caveat still stands that the percentage premium goes up the smaller you go. (But even with the high current premiums, a 1/10 oz gold eagle or maple leaf isn't going to cost a 93% premium!)

And right now is a pretty terrible time to get into precious metals anyway, since interest has jumped significantly lately, and supply at dealers is down significantly, and premiums are up super-significantly (especially on silver and low denomination gold).

quote:

Originally posted by RogueJSK:
When you buy gold, you pay spot plus a premium.
When you sell gold, or use gold in a transaction, you typically get spot or just under spot.

The issue with small denominations of gold is that as the amount of gold goes down, the premium almost certainly increases, percentage-wise.

So that 25 Goldback note contains 1/40th of an ounce of gold. It sells for $89.16. At current spot, its gold is worth $46.17. That's almost a 93% premium. Roughly double what it's worth.

Compare to something like a 1 oz gold eagle coin, which is worth $1846.80 at spot, and currently sells for $2006.79. That's about a 9% premium, and even that is 2x-3x higher premium than they usually cost, due to the current high demand.

While I'm not sure one can ever have too much gold, I've got the 1/2 & 1oz sizes pretty well covered. I was hoping to beef up the smaller side of things. Private party transactions typically don't have room for "change" in exchanges. So when transacting for items worth $200-$700 or so. The gold notes seemed like a good smaller exchange medium. You guys are raising very good points though. I appreciate the input. I'm trying to do some soft polling in my local circles also. At a minimum, I'll probably invest in a token amount of various sizes so it is easier to accept them in our business. With the expectation of increased crypto scrutiny, local business owners are moving back into precious metals again. We've yet to complete a business deal though, as I tend to offer spot.

Having some fractional gold for smaller transactions isn't a bad idea, especially since it sounds like you're in a location where gold is more widely accepted. I just wouldn't use those goldbacks as the means to it. I mean, 93% premium is ridiculous.

If you're after $200ish denominations, look at the 1/10 oz versions of the main minted gold coins, like Eagles and Maple Leafs. They're currently worth ~$185 at spot, and can be had for "only" a 25-30% premium. (Again, still significantly higher than larger denominations, and significantly higher than prior premiums even not that long ago.)

There are also 1/4 oz versions, which are worth $462 at spot, and premiums will run you ~20%.


I don't have a crystal ball, but I suspect that waiting a few months will likely be a much better time to buy some fractional gold, once supply rebounds from this recent January and early February mad rush, and premiums hopefully decline back closer to normal. But the last year has been wild in precious metals, and premiums have been increasing fairly steadily, even as spot and demand have risen and fallen, so who knows.

Thank you.

Waiting will probably be fine.

We're seeing some Alaskans get real motivated to limit their bank held fiat, and not trusting large amounts of cash. It's almost easier to exchange gold than it is to walk in the door with 10K in cash.

Something else you can do to help minimize premiums is keep an eye out for private transactions, either locally or on forum classifieds. You can usually pick up gold and silver this way closer to spot, and almost always cheaper than buying from a dealer. You just then run the risk of someone trying to pass off counterfeits.

And with demand so high right now, you'll probably have a lot more competition than usual for any private sales.

Yeah, the local markets are pretty dry. Alaskans have been buying since the election, and positioning out of USD since last winter.

Same goes for around here. There's been a big run on coins since mid/late 2020, gold especially, and all the local dealers have been out of gold coins for the past 3-4 months and low on silver.

That buying frenzy then intensified even further over the past couple weeks, with an even bigger run on silver.

Interesting times, for sure.

I bought $100 worth of Utah Goldbacks just to have them. I'll probably gift them as novelties to kids in the family.

What about contacting a “we buy gold” place to buy their inventory, before they send it off to be reprocessed

The obvious risk is that you are exposed to fluctuations in gold prices.

Ran across this news story today. It seems the State of Idaho is moving forward with a plan to stock up on physical gold and silver, as an inflation hedge.

A bill amending the Idaho code to add the ability to use some of their reserve funds to purchase and hold physical gold and silver has passed the House, and is headed to the Senate, where it's expected to pass as well. https://legislature.idaho.gov/...1/legislation/H0007/

From https://www.kitco.com/news/202...tion-risk-hedge.html

quote:

The legislation was introduced by Rep Ron Nate (R-Rexburg) and Senator Steve Vick (R-Dalton Gardens). In earlier testimony in front of the House State Affairs Committee, Rep. Nate said, "With new concerns about financial instability, it makes sense for investors, and it makes sense for states, to turn to real assets, especially in terms of precious metals, to protect their funds."
...
The group noted that because Idaho's reserves, which is made up of low-interest bonds, have mustered a return well below 2% -- a negative rate of return when adjusted for inflation.

This message has been edited. Last edited by: RogueJSK,

IMHO, there's more room to get into silver than gold right now.

I know a lot of big local players in my area that or sitting on, and buying, silver.
They aren't selling.

They will still buy gold, and flip it immediately. They are just taking the profit between the <spot/buy price and scrap that you get on small purchases.

The place I used to sell gold at 99.9% spot is now at 99% or less depending amount.

quote:

Originally posted by ElKabong:
IMHO, there's more room to get into silver than gold right now.

The current issue with silver is that supply is very low and premiums are crazy high right now, even as the spot price declines from its temporary peak. Demand for ounces of physical silver has increased significantly among the general public, and therefore is supporting that high premium from dealers and private sellers since enough folks are apparently willing to pay it. However, "paper" silver market trading, which is what drives spot and represents a much bigger portion of the silver market than individuals buying ounces at a time, is holding spot price as a significantly lower value than physical silver retail.

Finding physical silver at spot, or near spot, is simply not realistic right now. Premium is currently running 30%-50%+ in many cases, which is stupidly high, historically. For example, a 1 oz silver coin that's worth ~$27 at spot is costing $35-$40 at retail right now. It'll take a long time, or some significant event, before silver spot rises enough so that you can recoup that high premium you paid.

As a result, if you have the scratch and are wanting to pick up some physical precious metals right now, it's likely much better to purchase something like an ounce or a few ounces of gold instead of a bunch of ounces of silver. Potentially even fractional gold instead of a few ounces of silver, if you can find fractional gold at a reasonable premium currently (which as mentioned earlier is an issue as well).

Granted, there's a chance that silver can make a run and cover that high premium sooner than later, but that's obviously nowhere near a guarantee. And there are a number of market forces that appear to be keeping silver spot at or near its current levels for the time being. Yes, silver is still a decent long-term investment to be holding as an inflation hedge, it's just probably a bad time at this moment to be buying new silver, or especially just starting out with silver.

This message has been edited. Last edited by: RogueJSK,

To put the high physical silver and gold demand of the last year - and especially the last month - into perspective, let's look at just one data set from the US Mint.

These are the sales in gold and silver bullion coins (Silver Eagles and Gold Eagles) from the US mint for 2019-2021.

2019: 150 thousand ounces of gold and 15 million ounces of silver

2020: 845 thousand ounces of gold and 30 million ounces of silver

January 2021 only: 220 thousand ounces of gold and 4.8 million ounces of silver

So the US Mint sold more gold coins in January 2021 than in an entire quarter of 2020 or all of 2019. And they sold more silver coins in January 2021 than in 2 months of 2020 or almost 4 months of 2019. (The silver sales for January were held down by the fact that the US Mint had implemented limits on silver bullion sales, due to low supply. If supply was more normal, the silver numbers for January would have been significantly higher.)

That's just coins from one bullion producer, albeit the most popular bullion coins for US buyers to obtain. But you can extrapolate that out to infer that coins from other mints, or coins on the secondary market, would have seen similar levels of demand. And the fact that all of the various bullion sellers are low or out of stock on nearly all of the more popular bullion options backs that up.