Have you heard of goldbacks? It's a new form of currency that has been gaining media attention lately, leaving many precious metals investors wondering if it's a good investment. Goldbacks, also known as "gold foil notes," are physical currency that contain 24K pure gold embedded within each note. In this article, we will take a look at what goldbacks are and whether they make for a good investment strategy.
What are Goldbacks?
Goldbacks Currency
Goldbacks are a type of complementary currency that is made from pure gold. They are not issued by any government but are created by private companies. Unlike traditional paper currency, goldbacks are made from a thin layer of gold foil sandwiched between polyester layers, making it look similar to a regular dollar bill but with a beautiful gold design. Also, it is more durable and resistant to wear, and each note has a small amount of pure gold within it, providing stability to the currency's value.
Goldbacks are available in several denominations, including 1, 5, 10, 25, and 50. The larger denominations contain more gold than the smaller denominations, with the amount of gold increasing proportionally with the denomination. For example, a 50-goldbacks note has more gold embedded within it than a 1, 5, 10, or 25-goldback note. Each goldback note contains 1/1,000th of a Troy Oz of 24-karat gold. Goldbacks can be exchanged for larger notes, meaning it is possible to trade fifty of 1 goldback notes for a single of 50 goldback notes and vice versa. The dimensions of each goldback note are 4.65 inches (11.74cm) by 2.57 inches (6.53cm).
How do Goldbacks Work?
Goldbacks work similarly to traditional currency. You can use them to buy goods and services just like you would use paper currency. However, because they are made from gold, their value is tied to the price of gold.
The value of a goldback depends on the current market price of gold. If the price of gold goes up, its value will also increase. Conversely, if the price of gold goes down, the goldback will decrease.
Are Goldbacks a Good Investment?
Goldbacks were minted in 2019, which makes it challenging to understand the future valuation of the currency and how popular it will become. The price of goldbacks was $2.00 in 2019, but in 2021, the average cost of goldbacks was $3.75, an 87.5% increase in value over those two years.
Goldbacks have experienced a significant short-term gain in value, with an almost 90% increase from 2019 to 2021. However, it's essential to consider the variables contributing to this increase. Initially, in 2019, goldbacks were only available in one state, resulting in a very low floor price. As awareness of goldbacks grew, demand increased, and the price began to rise. However, it's still being determined if this upward trend in demand will persist in the future, making long-term projections for goldback investments challenging.
Regarding long-term investments, it's difficult to predict the future value of goldbacks due to various unknown factors surrounding this type of currency. Given its novelty, goldbacks may face governmental regulations or other issues that could result in its sudden decline. Thus, investing in gold backs for the long term could pose a significant risk.
Pros and Cons of Investing in Goldbacks
Pros:
- Diversification: Investing in goldbacks can provide diversification to your investment portfolio. Because goldbacks are not tied to the stock market, they can provide a hedge against market volatility.
- Inflation Protection: Gold has historically been a hedge against inflation. When inflation goes up, the value of gold also tends to increase. By investing in goldbacks, you can protect your wealth from the effects of inflation.
- Unique Investment Option: Goldbacks are a unique investment option that can add variety to your investment portfolio. If you're looking for something different from traditional investments like stocks and bonds, goldbacks might be worth considering.
Cons: Lack of Liquidity: One of the most significant drawbacks of investing in goldbacks is the need for more liquidity. Because they are not widely accepted as a form of payment, it can be difficult to find buyers if you want to sell your goldbacks.
High Premiums: Goldbacks typically come with high premiums, which can affect your returns. If you're not careful, you could end up paying more for your goldbacks than they are actually worth.
Limited Upside Potential: While goldbacks can provide a hedge against market volatility and inflation, they are unlikely to generate significant returns on their own. If you're looking for high returns, consider other investment options.
The Benefits of Goldbacks
Goldbacks were created to solve some of the financial issues that have been around for thousands of years. One of the main issues is that fiat currency, such as the US Dollar, is not backed by anything physical and can be printed whenever the government wants to. Inflation can drastically reduce the value of the cash you hold based on how much currency is printed and looking for ways to combat it.
Goldbacks offer a solution to this problem because they are backed by a physical asset, which is gold. This means the currency's value is tied to the value of gold, which has historically been a stable and valuable asset. As a result, holding goldbacks can provide a hedge against inflation and currency devaluation.
Another benefit of goldbacks is that they are decentralized, meaning they are not controlled by a central authority like a government or a bank. It gives individuals more control over their financial assets and can help reduce the risks associated with centralized management.
Goldback Price Chart: Average Exchange Rate 2020-2023
To better understand the fluctuation in the price of goldbacks, we have created a chart that shows the average exchange rate from 2020 to 2023. As you can see, there has been a steady increase in the price of goldbacks over the past few years, with a significant jump in 2021.
This upward trend is expected to continue in the coming years, making Goldbacks a smart investment choice for those looking to diversify their portfolio and protect their wealth against market volatility. Whether you're a seasoned investor or a newcomer to the world of alternative currencies, Goldbacks are a great choice for anyone who values stability, security, and long-term growth.
Who Created Goldbacks?
Goldbacks were created by a private company called Goldback, Inc., based in the United States. The company was founded by Larry Hilton, a precious metals dealer who has been involved in the industry for over 30 years.
Where Are Goldbacks Accepted?
Goldbacks are accepted in a growing number of locations, including local businesses, online retailers, and even some government agencies. However, it is important to note that they have yet to be widely accepted, and their acceptance may vary depending on the location.
Where Can You Buy Goldbacks?
Goldbacks can be purchased from various sources, including online retailers, coin shops, and precious metals dealers. Some popular online retailers that sell goldbacks include APMEX, JM Bullion, Golden State Mint.
Is Goldbacks Legal Tender?
Goldbacks are not legal tender in the United States, meaning they are not recognized as an official form of currency by the government. However, they can still be used as a means of exchange and hold value as an alternative currency.
Final Thought
Goldbacks are a unique form of currency that offer a number of benefits, including being backed by a physical asset, being decentralized, and providing a hedge against inflation.
While they have shown to be a good short-term investment, the long-term prospects of goldbacks are still being determined, and many variables could impact their future valuation.
To conclude, goldbacks are not a conventional or widely recognized investment option, and their value fluctuates significantly due to market changes.
While gold has historically been considered a store of value and a hedge against inflation, goldbacks may not provide the same level of security and stability as established investment options like physical gold bullion.
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