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Adam Taggart: Hello and welcome to the Resilient Life podcast. Resilient Life is part of PeakProsperity.com and it’s where we focus on practical and actionable knowledge for building a better future. I’m your host Adam Taggart and today we welcome back Adam Trexler as our guest for the program. Adam’s the president of Valaurum, a very interesting company that we have profiled over the past two years. Valaurum has introduced an entirely new way to own and hold gold using a proprietary technology it injects gold directly onto a polymer surface creating a note coated in gold which they call an aurum. Dimension wise it is very similar to a dollar bill you carry in your wallet. Basically it gives you the ability to store, carry and transact or share fractional grams of gold with other people. Our previous podcast with Adam had gone deep into the technology of producing aurum as well as the growing interest around the world for such a portable form of gold. They have also been some of our most popular podcasts ever. If you haven’t listened to them yet, you should. The story of aurum is fascinating.
Today we’re going to talk with Adam about the progress aurum has made over the past year. Is this new form of gold catching on? He has got some exciting updates for us including the launch of the new 2016 Peak Prosperity aurum note. Adam, thanks for coming back on the show.
Adam Trexler: Adam, thanks for having me. It’s always a pleasure.
Adam Taggart: It is always fun. Well let’s dive right in. For the few people listening who haven’t listened to our earlier podcasts with you can you very briefly summarize what the purpose of Valaurum’s note is?
Adam Trexler: Absolutely. So the aurum is a new way to hold gold. And if you think about the historical forces involved and take a step back over the last 40 years gold has gone from cost of about $40 a gram to well over $1000 today. The result of that is that traditional coins and bars that have been used for 3000 years to hold gold are simply unaffordable and not very useful in today’s world. The supply of gold has not increased at the same rate as the number of people who want to own gold has increased. As a result we need new technologies to make physical gold affordable and usable and holdable by everybody.
Adam Taggart: Great. And Adam, I just wanted to interject here. You mentioned pricing going from about $40 to $1000 I think you mentioned gram but I think you maybe mentioned to me in ounce there is that correct?
Adam Trexler: That is correct – that is per Troy Ounce. We as an international company tend to describe our products in terms of grams. Of course it is just metric not imperial.
Adam Taggart: Great. Yea, so.
Adam Trexler: Thank you for clarifying.
Adam Taggart: No worries at all. Maybe it is just worth spending a second describing you know the form of the aurum note and all of that.
Adam Trexler: Sure. So it feels a bit like a – a plastic sheet. It’s fairly sturdy, but very much flexible. And it is actually it feels like an integral thing like a single sheet, but it is really a miracle of material science. The reason for that is it is composed of one layer of flexible polyester and in that layer on top of that layer there is a very precisely controlled layer of 24 carat gold printing also goes in the middle and then there is another layer of polyester on top of that. Effectively what you have is a gold sandwich if polyester is the bread and gold is the meat or cheese. It makes it possible to have a very precise amount of gold in a small quantity.
Adam Taggart: Great. From a form factor it is pretty much the same size as US Dollar bill maybe slightly different in dimensions but basically can easily fit in your wallet right alongside your one dollar, five dollar, 20 dollar notes. One of the things I like about it is that level of convenience. It doesn’t require any behavior change on behalf of the person who is already carrying currency in their wallet. If they want to have a little bit of gold in their wallet I mean right now it is probably a little bit more of a collectible or curiosity. But if we ever got back to the day where people were exchanging precious metal for every day transactions they wouldn’t have to change any of their behavior in terms of how they carry their money around with them. And for those who have yet to see it and you will see pictures on the website accompanying this podcast you know the fractional amounts of gold that are used are enough to make this thing look like gold. I mean it has the sheen, the luster, the color. It looks just like gold except it has that flexibility you talked about because of the polymer.
Adam Trexler: Absolutely and what you are seeing isn’t the gold – the polyester we use one of the dozen characteristics we had to select and we do use a proprietary polyester is that it has a very good optical quality. So one of the advantages of the aurum is that you are really seeing all of the gold or a very high percentage of the gold. There is another advantage of gold in this form which is if you have a bar there is a lot of material that is hidden in the center of the bar which makes it possible to counterfeit it to have something that is gold coated.
Adam Taggart: Right. Everybody always worries about getting a fake that is gold coated but it has Tungsten or something inside of it and you are saying here you are seeing the entire surface area and there is really nothing hidden beneath it. it is just fractional amount of gold.
Adam Trexler: That’s right and there is – it is theoretically possible to have multiple layers of different material. To do that it would be highly cost inefficient and it makes cheating on this kind of product much, much more difficult than cheating on a bar or a coin. So the confidence that somebody can have in it should be much higher.
Adam Taggart: In previous podcasts we have really gone into the technical elements of production and everything from security to counterfeiting and all that stuff. But I do recall you saying it is relatively easy to test these as well for authenticity to make sure that it is not a counterfeit material. Can you just briefly speak to that?
Adam Trexler: There is. We are actually talking to a new firm that is interested in making a device for this that would allow you to test each individual one. Probably the easiest thing to do is a fire assay and a jeweler would have the equipment to do that. So basically what is done is that there is a two step melting process the plastic – the remaining chemicals from the plastic is pulled off and the gold is perfectly recoverable. And we would never make a product where you couldn’t recover the gold that you would have to be able to convert it to other uses for you to still be a commodity product.
Adam Taggart: Great. Great. I don’t want to go back down as far in the weeds as we have in the previous podcast, but obviously the intent of the aurum is to be an exchangeable amount of gold, but if you did decide that you wanted to melt it down for its spot value you can, correct? You can put one of these in a crucible and you end up with a little tiny ball of gold, correct?
Adam Trexler: That’s correct. Like I said it is a two step process. You need some borax and if anybody is really interested in that I’d be happy to talk to them about how precisely to do it. But it is a – it is a bit involved if you just burn it up that doesn’t quite do it.
Adam Taggart: Well that makes a heck of a lot of sense to me too because you would really only melt something down to exchange it for something and these notes are in such a sort of ideally exchangeable form I am not really sure what you are getting by melting it down but that definitely gives people some piece of mind to know if they wanted to they easily could melt these things down.
Adam Trexler: I have two things to say – sorry, I just wanted to interject two points about that. The first is that we believe this is a higher value form of gold than a melted pellet and in the same way that you would ever melt down gold eagles to make a piece of jewelry. The gold is too valuable in that form in addition to it being a sovereign currency. You want – gold coins has a natural premium over melted gold and the aurum certainly fits into that category.
Adam Taggart: Completely understandable.
Adam Trexler: We see that yeah.
Adam Taggart: I know when you talk to your dealers if you walk in with a sovereign gold eagle they know what it is. They have a high degree of confidence in it that they can inspect it very quickly and make a decision whether it is authentic or not and they know that they can sell it to somebody. Where you walk in with a misshapen lump of gold that you have melted down and they have a lot more concerns based on that. Everything in the aurum to my understanding is that it is sort of hyper standardized and so if you walk into a dealer with an aurum who is familiar with the aurum they are very quickly going to know whether it is authentic or not.
Adam Trexler: That is correct.
Adam Taggart: Since we are sort of on this production theme I know that one of the big bits of news you have since the last time we talked a year ago is that you made a number of important production improvements that I believe have allowed you to create bigger notes. And by bigger notes I mean a greater amount of fractional gold as well as maybe being able to offer better pricing. Can you talk about that?
Adam Trexler: Absolutely. Well this is one of our great success stories. When we first did our first podcast we were just really starting to sell the aurum and we created a tremendous demand or we saw an incredible demand in the marketplace for gold in this form. It was so great that we over ran our original productive capability and really had to go back to the drawing board and look at every step of our process. Of course speed, production speed and production efficiency go together. And as we have worked on it we have worked very, very hard on everything from printing to how we put the metal down to the processes eliminating several steps and we have really been able to drive down the premiums. One of the things we found just very recently in the last three months or so is we were doing a bunch of R&D about what are our physical limits about what we are able to put down. And originally when we first started we thought it was closer to a 20th of a gram and we brought it up to a 10th of a gram and now we have found ways to have something that is 250% thicker and indeed bring the premium down quite a bit again maybe by 40%.
Adam Taggart: That is fantastic.
Adam Trexler: One thing that is not immediately obvious to people is that when you pour a coin or pour a bar or stamp a coin, pour a bar there is not necessarily premium based on the size of that thing. With our process we are depositing the gold atom by atom in a vacuum chamber that is about equivalent to deep space. The result of that is that you have very high machine costs, these machines have not been around nearly so long as 2000 years of stamping coins and we – a lot of that process is dependent on how thick it is. So our costs don’t go down based on having a higher denomination or a higher wage. In fact, we are spending pretty linearly that much more machine time. So to bring the cost down and have a heavier weight are both significant achievements from an engineering point of view.
Adam Taggart: That is great to hear. I know in our previous podcasts we have had some education to do for folks. If you do the math the fractional gram units of gold have a much higher percentage premium than buying an ounce or fractional ounces of gold and you know it is actually the natural math curve as you go down in terms of the smaller the increment basically mathematically the higher the premium a spot has to be in terms of the effort that is involved in manufacturing. What is interesting is that is true at the gram level meaning premium is higher on a gram level than it is on an ounce level but what you are saying here is once you get to the level at which you are dealing with it is actually more expensive for you to manufacture something that is – or it is less costly to manufacture something that is a smaller increment because of the machine time – is that accurate?
Adam Trexler: That is right. So for us to manufacture a 10th of a gram is certainly cheaper than to manufacture a quarter gram, but the flipside of that is that having a process that involves this kind of atomic deposition is just vastly different than making a tiny coin. People do need to understand that.
Adam Taggart: Right. The fact that basically it sounds like you know since we started talking a few years ago it sounds like you have been able to get the cost associated with the premium down a round 40% you said?
Adam Trexler: I would say 30 to 40% over the last year and we probably cut it in half the year before that. So we have really been working hard on that. of course it doesn’t add up to 80% but sort of half and then half again or something close to that. We just worked very hard to – what I am focused on is delivering value to our customers. I think that really opens up the market.
Adam Taggart: That is what I really like because one of the hang ups valid or not has been people looking at the premium despot and saying wow it is a lot higher than what I pay for an ounce level. Again, we have done the math for them there is clearly mathematical reasons why the smaller you get the higher the premium goes but it still is a high mental hurdle for some folks and the fact that you are working so hard to get that down as low as you can especially over such a short period of time with the progress you have made is really impressive and to me it really speaks to how important it is for you guys to address whatever hurdles people have to getting comfortable with this new form of gold. Anyways, kudos see you guys on your team and what you guys are doing to me I just hear that and I think wow you know a great option for gold holders just became even greater.
Adam Trexler: Well I really appreciate that and my real aim is to democratize gold ownership. I want to see many more people owning gold. And what I see is that gold will continue to become more expensive relative to paper currencies. It is a limited commodity and this will become more and more important as the vehicle for precious metal ownership and I want to make that available to people and I want to pass on whatever we are able to do to create value to the people who would be our customers. And that is what I see as my job.
Adam Taggart: Okay. Let’s shift gears then and follow that vein. So we have gotten kind of detailed into the production aspects of the product which I think are really interesting and they are important for people to understand but at a higher level I think at a higher level we see the world similarly in the sense as you said gold is a limited commodity, there really is no upward bound theoretically to fiat currency and certainly what we have seen over the past seven years is that central banks have been pretty unchecked and fearless in terms of how many trillions of paper – monetary units they are willing to create. I guess digital is probably a better word at this time. But you know, basically.
Adam Trexler: One fascinating thing if I could interject is that we tend to think now about currency and currency innovation in the digital space and that is both public and private. We know that governments have been creating digital dollars and we also know that a lot of innovations like PayPal have been in that digital space. What I find really fascinating is that one would expect as that digital currency expanded physical currency would contract. They would not need to actually physically print paper dollars, paper pesos, what have you. The opposite is actually true and the quantity of paper currency has been rapidly expanding too. Not quite at the same exponential levels but I believe there will always be a need for a physical currency and it is just not going anywhere. In fact, it is becoming more intense as we have a digital world because you need both physical and digital.
Adam Taggart: Right. I am sure especially too when you talk about democratizing gold you can see some of the more advanced western nations if we move to a digital dollar era or you know if I don’t think this is going to happen bit BitCoin becomes the coin of the land and the country or whatever. It is an advanced western country. Maybe everybody does get their own sort of personal digital dollar card that you are able to use for payments the way people can use their SNAP card here in the US. That is going to take a long, long time to get into the majority of the world’s countries. In a lot of those countries too given the price of gold on an ounce basis is pretty hard to own gold when you know, your family is making a couple of dollars a day in terms of household income. And the great thing about the aurum note is you are putting it in such small fractional units that it is just actually a couple of dollars and you know, you can have that family that is basically kind of doing more or less subsistence living if they can scrape up $10 worth of savings they can actually own some gold which is something that is just sadly too far out of the realm of possible for them today.
Adam Trexler: I think that is right. And what I am really interested in is having a standard storage of that value that is exchangeable from people very high net worth down to people who are at subsistence level. What I think is distinct about us is having that physical gold tangibly in your hand. And as that becomes a recognizable means of storing value it becomes very useful to people. It is easy to find a dealer to get value back out when you need it, but also have a means of diversifying what you are holding.
Adam Taggart: I go to where we ended our last podcast on which is you kind of gave us a really interesting tease about a sovereign central bank that you said had contacted Valaurum and was working with you guys to potentially and I guess this was quite serious you know replace their country’s fiat currency with an aurum based note. I think that it would have essentially made them the first country in the world to go back onto the gold standard in terms of its monetary system. Is there any update you can tell us about what is going on there?
Adam Trexler: That is very interesting. I do want to clarify something – I think what would happen in the first instance if you would have an aurum note sitting alongside paper notes and effectively people would be able to choose do you want your money printed on gold or do you want your money printed on paper. And I think that would be a first step for a country.
Now to answer your question that is kind of a fascinating and sad story. We were working with a central bank. We are still in conversation with them and actually two more as well. And when I say in conversation with them all three we have met with the head of the central bank and having very high level talks with them.
Adam Taggart: In person meetings with the heads of the central banks there.
Adam Trexler: Yes. And the country I was talking about last year Valaurum representatives and myself I think had nine total trips there. So this was – we were very, very close to doing something when we spoke last year. What I saw or what happened was the economy of the country in question fell apart and I’m sure all your readers know about what has happened to the price of oil. You had a country that was very exposed to the – to commodities prices. The price of oil dropped. Gold dropped a little, but nothing compared to oil and it really tanked the economy suddenly had hundreds of millions of dollars of short fall in the government. I had a conversation with the governor of a central bank where I said yes, we are going to do this. Didn’t get to a signed contract and in the meantime the price of oil fell apart and the whole deal fell apart because they were printing paper to pay their shortfalls.
Adam Taggart: To cover the shortfall. Got it.
Adam Trexler: It kept devaluing their currency. So you went from the possibility of the hard money product to the most painful kind of devaluation of currency over night. And it was sad for me to see because I saw it as a real opportunity both for the people of my country and the country itself and you know we will – I believe we will have a country do this and a number of them, but sometimes you are witness to enormous forces and the price of oil I think is an enormous force certainly for a company the size of Valaurum right now.
Adam Taggart: Sure. Sure. And the collapse in the price of oil over the last year has been historic. Bad timing I guess. You said in addition to that country though you are talking to two others as well.
Adam Trexler: We are and have put in formal proposals and I think it will work. It is something that a country can benefit from. They can take it to future advantage. It is something that is likely to be very popular with the public and we are eager to help wherever our country wants to use our services. And in that case we would be acting as a private mint. And a lot of countries actually have private currency printers or coiners, mints that provide them with the physical currency. The government would be the issuer of the currency.
Adam Taggart: Okay. When you are having these discussions with these other central banks what are they listing from your perspective what are the biggest draws of getting out of the fiat game if you will and going back to a precious metal backed currency? I love the aurum because it is not really a precious metals backed currency. It is a precious metals currency. You don’t bring it in to exchange it for anything it is what it is. What do you see as the central banks’ primary motivations here? Because it is a big risk for them I imagine.
Adam Trexler: Well it is and it isn’t. When you are making money, literally you are making money – traditionally one of the main roles of a government was to mint coin and there is a necessary natural mark up over bouillon so raw filter, raw gold when you turn that into coin. And the government of the country – you know, England for instance made money by minting coins. People would – private citizens would bring in bars of gold, bars of silver and they would get coinage back. This is a way for a country to effectively make money. And at the same time the public likes it because they have currency that has an intrinsic value. I think there is a real hunger throughout the world for real coinage. I could point to a couple of things about that. One of them is that even when the price of precious metals has gone down over the last couple of years the demand the public demand for coins had actually gone up. A lot of it price pressure has been from electronically traded funds where people were speculating on gold silver. Not mainly people mainly you know large market makers. But the general public demand for coinage has only increased and that is very, very interesting to me.
The other interesting statistic I point to is the US state quarter program. I think if you check your pocket you probably have quarters with states on the back of them. This netted the US Government with $3 billion. And what that means is that $12 billion extra quarters and actually it was more than that because they had some costs – 12 billion quarters disappeared from circulation because people wanted to hold them. People were excited by the idea of having quarters and not just a bank balance. I have some and I suspect a lot of our listeners will too. There is just this incredible demand for something that feels physical, something that feels tangible and as it becomes something with real gold in it I think that will be even more in demand by the public. We stand to be servants of that force.
Adam Taggart: It is interesting. If we have any listeners that are listening from Argentina or Venezuela I am sure they are saying I wish we had this circulating in our economy over the past couple of years because when you mentioned earlier when the initial country you were talking with the deployment would likely be to have a side by side aurum type of note as well as the domestic paper currency. I would love to see that just to see physical manifestations aggressions law in action. And aggressions law for those that aren’t familiar with it that says basically bad money drives out good money. Meaning when you have competing forms of currency during times of trouble people hoard the types of currency that they have the greatest faith in and they want to get rid of the bad currency – the currency they have the least faith in first. So the currency that tends to really circulate is all the bad currency and the good notes or the good forms of coin or whatever are the ones that basically disappear. It would be interesting to see how quickly these aurum notes kind of get hovered up by the population and how they basically demonstrate that they prefer the precious metal currency versus the paper one. At least that is how I think it would go. It would be interesting to see a real time – a real world example what really happens.
Adam Trexler: I think that is actually very right. I think that the public would tend to very much collect gold notes. And look if I have a $20 paper bill and an aurum in my wallet given the chance to spend one I’m keeping the gold.
Adam Taggart: Right. Exactly.
Adam Trexler: A simple, rational decision. Particularly if they have the same face value of course the aurum that we sell now did not have a denomination at all. They are not $20 or $10 they are simply the weight of the gold. We are not a government so we can’t say this has a face value. We simply say what gold is there.
Adam Taggart: You talked a little bit about the demand for coinage that we are still seeing in the world and quite frankly, growing demand. I think the big part of that too at least that we pay attention to at Peak Prosperity is the imbalance of demand for coinage coming from Asia versus the west and how we are seeing a lot of our coins and bars basically fleeing out there. I’d like to ask real quickly over the past year or so have you seen any change of interests from the dealer community – the coin dealer community in terms of the aurum product? I know when we first started talking to you it was very new. You were really just doing some sort of pilot deployments and we were fortunate enough to be one of your early partners there. Are dealers beginning to wake up to this and are you beginning to see any support from them?
Adam Trexler: They are and it is really exciting. You know we have actually done better in Canada than the United States just from a series of accidents. We have had some really great partners there. The aurum is more available in shops there.
One of the things that has been interesting is that I think that dealers have tended to focus on melt value. I don’t necessarily think that is a healthy perspective. I tend to be more interested in the spread. So melt value just as a quick brush up melt value means what can you get for a coin if you basically destroy it and extract the raw gold. Spread means what is this coin – what can this coin be bought for and what can the coin be sold for? I don’t think that the best use of an aurum is to melt it. I think that the best use of the aurum is to sell it hopefully to a dealer or another interested party and I think that there is a sort of educational process in the industry where we need to understand that we shouldn’t be melting coins, we shouldn’t be melting aurum, we should be creating real value for consumers by having a good spread for them.
In addition to that thought people do want to make sure there is good amount of gold and silver there. And as we have been able to bring down the premiums I think we are going to see us entering more and more markets. What I’d really like to see is that you can walk into any sort of – any town’s coin dealer and be able to buy aurum. As we are able to do that it really makes the value of the product much greater as people know about it, as dealers know about it as they are more and more comfortable that there is already a market for it. That is really what my focus is going to be over the next year in terms of that bouillon market is growing that. I’m very interested in having local dealers. I am very interested in national dealers and we just want to create a broader network for this product.
Adam Taggart: You are making me think of something in real time here as you are talking. You know the role of a gold dealer, broker/dealer basically is to give their clients access to previous metals in the forms that these people want to hold it and part of that is them clearly knowing the standards that are out there and being able to buy and sell gold and silver with confidence that they are indeed getting what they are buying in terms of quality and what not and authenticity. As new forms come on the market I’m sure there are some guys that are early adopters but I would probably imagine the majority of folks they are not really too enthused on taking a risk to buy a new form that they haven’t really seen before unless they are hearing from their customers that it is what their customers want. I remember bringing in some aurum to my local coin dealer and for sure it was the first time he had seen anything like it. Definitely caught his attention. This is where I used to live so I can’t tell you for sure if he is offering aurum in his shop today. We have had a number of people hundreds of people at least on Peak Prosperity who have bought aurums in the past – might be an interesting idea for them to consider walking down to their local coin shop with one of their aurums in hand and just showing it to the person there and letting them know it exists and getting their feedback from – from the dealer. We as an audience of aurum holders might actually be able to kind of help goose the adoption there by just letting dealers know that this is a form that we find kind of interesting and again if it is not on their radar already at least putting it on their radar for them to consider. My guess is having brokers become aware of the demand will certainly help them more easily make the decision to stock this. Am I thinking clearly here?
Adam Trexler: I just really appreciate the thought. I think that’s right and the more people know about it the more useful it becomes the more of an option it becomes for people. If Peak Prosperity – the Peak Prosperity audience wanted to do that then I woul
