Could using gold as cash help save you from costly currency conversions on your next trip?
Whether it’s an exotic trip to taste the wonders of Italy, or a long weekend excursion south of the border, travel has become increasingly expensive for Canadians thanks to our weakened dollar.
Not only do we lose money when converting our currency into U.S. dollars or Euros, but the fees to convert that cash and access our funds when overseas can quickly add up.
Wouldn’t it be so much easier if we could just use gold coins to dodge foreign exchange rates, like the good old days?
Thanks to Toronto-based startup BitGold, an increasing amount of Canadian travellers are investing in gold in order to hold savings and make payments overseas.
BitGold (which is in no way related to the virtual currency “bitcoin”) allows users to buy physical gold, which is stored at private vaults secured by Brinks around the world. Once you have purchased gold using the platform, you can store it as an investment or you can redeem your gold for US Dollars, British Pound, or Euros using the company’s prepaid “GoldMoney” MasterCard.
The idea is that you would sell your physical gold in whatever currency you wish to spend in without losing money on the conversion.
“Gold transcends borders because it’s universal,” said BitGold CEO Darrell MacMullin. “It’s the only global currency.”
MacMullin said the company has seen more than 20 per cent more Canadian users since January, likely thanks to the falling Loonie.
Some of those clients have been using gold bullion to help get around expensive money transfers overseas. For example, one Toronto-area BitGold client, who is getting married in England, has been using his account to pay wedding suppliers in British Pounds.
“He said to us, ‘If I was saving for this wedding in Canadian dollars instead of gold it would be a much smaller wedding,’” said Josh Crumb, co-founder of BitGold.
But is gold really the ultimate travel hack?
“People in Canada are obviously very familiar with how far and how fast the dollar is falling against other currencies. But gold is something that is a nice even benchmark, where over time it purchases the same amount of things in any country,” Crumb said.
BitGold’s “GoldMoney” MasterCard is free to use and can be used wherever MasterCard is accepted. Users would sell their gold for whatever its worth in the desired currency they wish to use and pay a one per cent fee each time they buy currency. The only other fee would come from using the card at a foreign ATM – which can cost up to CAD$10.
However, gold is still a commodity and fluctuates in price – meaning the investment can still be risky.
Financial expert Preet Banerjee said that while the fees to convert Canadian dollars into local currency when traveling can be quite costly, there is still a risk in investing in gold.
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“The idea behind this company is relatively simple: attract customers with the promise of lower transaction fees. However, it is very important to note the volatility in the price of gold can affect whether or not you come out ahead or not,” Banerjee told Global News.
“For example, since the beginning of 2013, gold has lost roughly 25 per cent of its value (in USD). But these fluctuations can occur quickly too – there was a two week period in June of 2013 where gold lost roughly 11 per cent in value.”
On the flipside, Banerjee said this volatility can also work in favour of those who invest in the precious metal.
“Since the beginning of 2016, gold has gained roughly 18 per cent in value. So, in some cases it would be possible that the increase in value of gold is greater than the transaction fees of using the service, but in other cases it would be possible that a decrease in gold prices would far outstrip any savings in transaction fees,” he said.
“Since we can’t forecast the price of gold, this introduces an element of speculation into the equation. Of course, we know that the Canadian dollar also fluctuates in value relative to other currencies, but keeping track of multiple conversion rates to figure out if you’ve come out ahead or not can be complex.”
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