Mark Hilton, President & CEO, Alpine Gold Exchange
I want to briefly explain the recent changes to our buy-back appetite and the establishment of our rewards program. Most importantly, our commitment to Sound Money principles remains unchanged and rest assured there has also been no change to the metal balance in any account.
Appetite Program
A precious metals exchange requires a balance between members seeking to buy metal and those seeking to sell it. When sell-back requests exceed new purchases, we must locate buyers outside our closed-loop network for the excess metal. If secondary-market demand is limited, we must temporarily restrict the amount we purchase each day to responsibly manage our liquidity.
Historically, member sell-backs have been less than 40% of new purchases. This year, for the first time, sell-back requests for certain metals have persistently exceeded new purchases, resulting in a significant surplus. Like other exchanges, we must therefore establish a daily “appetite” based on average sales and our ability to sell off excess metals into secondary markets.
To give more members regular access to the appetite, we have changed the individual allowance from $10,000 per month to $2,500 per week. This maintains approximately the same potential monthly allowance while preventing a small number of large transactions from consuming the available appetite on any given day.
Rewards Program
The rewards program has two goals: keep precious metals liquid and usable as everyday money, and make sure the program stays healthy during periods of sharp price increases and high selling activity. That balance is what lets us keep offering it long term. As an illustration to better understand the risks of an unlimited zero spread offer assume a member purchases $5,000 of gold and Alpine Gold earns a 4% spread, or $200. If the gold later doubles in value to $10,000 and the member sells the entire amount back at zero spread, Alpine Gold must find another buyer for the metal without earning the approximately $400 spread normally associated with a $10,000 transaction. After accounting for the $200 originally earned, the company would incur a net economic loss of $200. The previous uncapped 0% buy/sell spread is not sustainable for any business long term and doesn’t align with the original intent of the benefit.
To address this risk, the rewards points will apply to the member’s original U.S. dollar deposit amount. In the above example, the original $5,000 would qualify for $5,000 in Rewards balance points. These points can be applied to zero percent spread liquidations or other offers. The increase in value portion would be exchanged at a normal market rate. This allows our account holders to be protected from redemption costs in normal market conditions without exposing the company—and ultimately our members—to unsustainable losses. This offer remains unmatched in the industry.
To provide additional value and flexibility with this program, in the near future rewards will also qualify to be used to reduce vaulting fees, eliminate certain transaction fees, or increase lease return rates. These changes are designed to strengthen Alpine Gold’s long-term ability to serve our valued clients, honor our commitments, and continue to attract future clients with invaluable Sound Money solutions.
