Imagine, if you will, buying a hot dog and a Big Gulp at the local 7-Eleven, then reaching into your pocket to pay for the purchase with gold.
In 15 states across the country, that’s possible.
Ian Appel is an associate professor at the University of Virginia’s Darden School of Business and the John G. Macfarlane Family Chair and the academic director of the Richard A. Mayo Center for Asset Management. (Contributed photo)
Georgia lawmakers are considering legislation that would make that state the 16th to allow consumers to use gold to pay for purchases and settle debts. Although no states have approved it, there have also been efforts to legalize paying with cryptocurrencies, such as Bitcoin.
With gold prices in the U.S. hovering around $4,500 per ounce, lawmakers across the country say the idea is to give consumers a chance to tap into their investments when making purchases.
UVA Today checked in with Ian Appel, associate professor at the University of Virginia’s Darden School of Business, the John G. Macfarlane Family Chair and the academic director of the Richard A. Mayo Center for Asset Management, to find out more about gold, Bitcoin and spending with your investments.
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. The U.S. dollar was backed by gold until we came off the gold standard in 1971. Bitcoin has seen limited adoption for payments. One notable example was El Salvador, where Bitcoin was declared as legal tender back in 2021. However, it never got much steam, and last year, this law was rescinded.
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. You’ve pointed out one important problem with the use of gold as a currency. We live in a digital age, and it is impractical to think that we will have to lug gold around to pay for goods and services. Georgia lawmakers have proposed a bullion depository that could be electronically debited, helping to address this problem.
However, there are a host of other problems that make the use of gold impractical as a currency in the modern age. For one, the price is volatile. It’s not uncommon to see the price of gold fluctuate by several percent over the course of a day or two. Meanwhile, the prices of goods and services are denominated in dollars and typically move much more slowly. As a result, the amount of gold needed to buy a good would constantly fluctuate. A car may cost 10 ounces of gold today, but if the price of gold drops next week, maybe it would now cost 11 ounces. Since Bitcoin is even more volatile, this problem is amplified.
Q. If gold is difficult to use to make purchases, what makes it an attractive investment?
A. It’s important to take a step back and think about why gold has value in the first place. Part of the reason is obvious: gold is valuable because there is a finite supply and there is demand for the metal for actual uses. For example, gold is used in jewelry and has industrial applications.
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