Dispensing El Dorado

Last week I sat down to dinner in Florida with Mark B. Goldstein, managing partner of the PMX Gold ATM Network, the firm which was the first in the United States to launch a gold bullion vending machine.

On December 17, 2010, the company made a small splash in precious metal news, when it launched its bullion dispensing equipment at the Town Center Mall in Boca Raton, Florida.

Goldstein explained, over Argentine steaks al fresco, that his test marketing machine spat out almost $270,000 (£172,233) in gold over 2.5 months. That may not sound like much – but note that the early prototype operated in cash-only mode, accepting only dollar bills from “mom and pop buyers” per Goldstein. The next stage model for a broader gold-based financial platform is currently in development, with plans to add debit and credit transactions, as well as proprietary accounts and advisory services.

The machine’s launch last year generated a ripple of media attention, particularly from gold skeptics, who were keen to present the gold dispenser as an omen that precious metals were reaching frothy levels of speculation.

(I discussed the subject of asset bubbles in my Fund Strategy article, “Fizzy Assets” on 30 May 2011. More recently, however, I blogged that technical patterns for gold do suggest further new highs this year, after a current period of volatility and distribution)

Perhaps the moral of the tale goes back to the gold rush of 1849, when it was not the prospectors but the pick and shovel makers who made the real fortunes. Goldstein appears to be taking a leaf out of their book, since his economic model is based on transaction volume rather than price. Paul Volker made his own point famously, at a Future of Finance Initiative conference in 2009. After deriding Wall Street’s financial engineering products as useless and destructive to economic growth, the former Federal Reserve chairman named the cash dispensing ATM machine as the most successful financial innovation of the past two decades. “It really helps people, it’s useful,” Volcker said. Nervous gold bugs may understand that attitude, as they head to the shopping mall.

Vanessa Drucker is the American Editor of Fund Strategy, based in New York City.  She has worked as a financial journalist for 20 years. In the 1980s, she practiced banking and securities law on Wall Street, and is the author of two business novels. Vanessa can be contacted at vanessa.drucker@centaur.co.uk.