Picture yourself making a routine purchase at a convenience store and pulling out gold to cover the cost. This scenario might sound unusual, but it is a reality in several U.S. states.
Currently, 15 states have statutes that permit consumers to utilize gold for transactions and debt settlements. Georgia is contemplating legislation to become the 16th state to adopt this practice. Meanwhile, there are ongoing discussions about the potential legalization of cryptocurrency transactions, such as with Bitcoin, although no state has approved this yet.
The value of gold in the United States is approximately $4,500 per ounce, prompting lawmakers to consider allowing consumers to leverage their gold investments for everyday purchases.
To provide more insight into this trend, UVA Today consulted with Ian Appel, an associate professor at the University of Virginia’s Darden School of Business. Appel holds the John G. Macfarlane Family Chair and serves as the academic director of the Richard A. Mayo Center for Asset Management.
Gold and Bitcoin in Transactions: Historical Context and Modern Challenges
Q. Is there any precedent for gold or Bitcoin being used for transactions?
A. “Throughout history, many civilizations either made currencies from gold or otherwise used it as a means of exchange,” explains Appel. The U.S. dollar itself was linked to gold until the abandonment of the gold standard in 1971. Bitcoin, meanwhile, has seen limited use in transactions, with El Salvador briefly adopting it as legal tender in 2021 before reversing the decision.
The Practicality of Gold in Daily Transactions
Q. There are no newly minted U.S. gold or silver coins in circulation, so how would gold work for everyday transactions? Are we going to be using gold dust or shavings at the grocery store?
A. Appel acknowledges the impracticality of using physical gold in today’s digital economy. Georgia has proposed a system involving a bullion depository with electronic debiting capabilities to address this issue. However, the fluctuating price of gold poses additional challenges, as it can lead to constant changes in the amount of gold required for purchases. The volatility of Bitcoin exacerbates this problem.
Gold as an Investment: Why It Holds Value
Q. If gold is difficult to use to make purchases, what makes it an attractive investment?
A. The inherent value of gold is tied to its finite supply and the demand for its use in various sectors, including jewelry and industrial applications, Appel notes. This scarcity and utility contribute to its enduring appeal as an investment.
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