As central banks fire up the printer and the money supply increases steadily, citizens worldwide turn to scarcer assets to preserve their wealth. Gold and cryptocurrencies have been the undisputed winners, driven partly by convenience as Bitcoin and gold ATMs pop up on the streets of major cities. Gold ATMs, also known as gold vending machines, provide a level of luxury and convenience unimaginable in the precious metals industry just two decades ago.

What Are Gold Vending Machines?

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Gold vending machines or ATMs dispense gold bars or related gold items in exchange for standard government-issued currency, such as the United States dollar.

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These machines make investing in gold more accessible to ordinary people. Further, the accessibility of vending locations, and ease of use of machines ensure gold traders capture a bigger demographic of investors, including people who would otherwise not consider buying precious metals.

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The first gold vending machine in the world was placed in the lobby of Abu Dhabi’s Emirates Palace Hotel in May 2010. The gold-plated vending machine stocked various gold items, such as gold coins and 10-gram bars. Later on, in December of the same year, the first gold vending machine in the United States was installed in Boca Raton, Florida.

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In the United Kingdom, the first gold vending machine appeared at the Westfield Shopping Center in West London in 2011.

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How Do Gold Vending Machines Work?

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Gold vending machines utilize traditional vending machine technology to accept payment and deliver gold items to customers. If you’ve ever bought drinks or snacks from a vending machine, you can easily use a gold vending machine.

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A gold vending machine is designed to carry and dispense a variety of gold items. Some of the items you can expect to find in a gold vending machine include

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• Gold bars by weight - 1g, 5g, 10g, 20g, 50g, 100g, 250g, etc

• Gold jewelry

• Gold coins

• Gold souvenir items

• Gold gift items

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When a customer buys gold items from a gold vending machine, they typically get the product in beautiful packaging with an anti counterfeit hologram label as well as a description of the purity and weight of the gold.

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A typical gold vending machine has the following features

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• Is wrapped in gold leaf, for aesthetic reasons

• Has cash and cashless payment methods, mostly a credit card slot

• Has ID-scanning capability to check IDs for those transactions exceeding money-loundering limits

• Is connected to the internet to monitor real-time gold prices 

• Has remote management and communication capabilities, including the ability to notify the operator of a breakdown

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The price of gold is determined by supply and demand. Gold prices fluctuate throughout the day, and the vending machines need to keep up with these fluctuations as customers want to pay a fair market price for gold. Gold vending machine operators apply a premium to this market price to make a profit. Most operators update prices every 10 minutes to reflect the prevailing gold prices in the market.

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Note, though, that the official gold price is fixed by the London Bullion Market Association (LBMA). The association fixes the price twice daily, at 10:30 and 15:00 London GMT. The price is set in USD.

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Given the value of their inventory, gold vending machines are significantly sturdier than normal machines. The body is designed to withstand break-ins. In fact, some manufacturers test their machines using explosives just to ensure they are tough enough.

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Are Gold Vending Machines Profitable?

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The business case for a gold vending machine is the convenience it provides customers. For this, operators charge a premium and sell gold at a significant markup above the price fixed by the London Bullion Market Association. The markup varies by operator and typically ranges from 10% to 30%.

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As is the case with most vending machine businesses, location plays an outsized role in the success and profitability of a gold vending machine. To increase the chances of your gold vending machine being profitable, consider the following factors when choosing a vending location

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• Age of the people who frequent the location. Gold vending machines are popular with people in their 20s and 30s, who are more receptive to new tech and trends

• Ability to buy. Given the price of gold, you want to put the gold vending machine at a location frequented by high-net-worth individuals.

• Propensity to alternative investments. Gold vending machines do well at locations frequented by people likely to consider alternative investments. These investors are looking for alternative assets that can help them navigate volatile markets, or assets that can help them diversify their portfolio. Therefore, putting a gold vending machine in financial districts and high-end malls makes sense.

• Daily foot traffic. The best vending locations have a lot of foot traffic. You want more than 75 people to see your gold vending machine daily.

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Because location is the single biggest factor determining the success of a vending machine, you want to invest the required time and money to secure a good spot. Take advantage of our list-building service to discover potential vending locations near you.

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Aside from putting your vending machine in a good location, you want to stock in-demand gold products to increase your chances of success. With time, you should be able to tell from your sales data what gold products (weight and type) sell the best. Also, consider the fact that casual gold buyers may find it easy to buy gold products with more real-world utility other than being a store of value - for instance, a gold jewelry piece may sell better than gold bars at certain locations.