by Mish Shedlock, Mish Talk:
I invited Keith Weiner, CEO of Monetary Metals, to explain how to get interest paid in gold, in this guest post.
The following discussion does not constitute financial or investment advice from either me or Keith Weiner.
Getting a Real Yield in Gold – By Keith Weiner
If you could earn 3% on gold paid in gold, or 3% on dollars paid in dollars, for the next 30 years, which would you choose? I suspect many, if not most, would choose gold. Dollars are constantly being devalued by the Federal Reserve. And then there’s the unavoidable and opaque bank risk. If 2023 has taught us anything, it’s that bank risk is alive and well 15 years after the Great Financial Crisis.
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The dollar system is harmful to the health of savers, and people need an alternative. Earning interest on gold is that alternative.
How Does Earning a Yield on Gold Work?
Monetary Metals Gold Fixed Income products (gold leases and gold bonds) provide that yield by financing qualified gold-using businesses.
Monetary Metals vets and matches qualified businesses who need gold, with investors who want to earn a yield on their gold.
Who Would Want to Lease or Borrow Gold?
Some gold businesses need to hold gold inventory, or work-in-progress. For example, jewelers, refiners, mints, bullion dealers, recyclers etc. They need to finance this gold somehow. The conventional solution is to borrow in dollars, buy gold (which incurs gold price risk), then hedge the price risk via futures contracts. But hedging adds complexity, risks, and costs to the business, not to mention the debt they just put on their balance sheet.
A gold lease is the ideal way for a company to finance the physical gold inventory or work-in-progress it needs for its business. It eliminates price risk for the company, and therefore, the need to hedge. It’s a simpler, easier, and cheaper way for the company to finance its gold inventory needs.
A helpful way to think about gold leasing is that the company is essentially renting the gold from you. Renting (leasing) the gold helps the company get the gold it needs for its business, without the hassle of managing a fluctuating gold price. The company can focus on making a profit on their products, while you get to focus on watching your gold grow every month as you receive your lease payments in gold.
Monetary Metals gold leases offer investors a short commitment, the security of knowing you own physical metal, which is insured, and a way to earn interest on gold, paid in gold (we offer silver leases too, which pay interest in silver). Structured as true leases of personal property, the leased gold always remains in physical form. Title to the gold remains with you, the investor. The gold is not loaned or hypothecated at any time. The gold is never an asset of the lessee, or of Monetary Metals. And both the lessee and Monetary Metals maintain insurance to safeguard against risk of loss.
Gold Leases and Gold Bonds
Our next gold lease, which opens next week, is paying 5% on gold.
Monetary Metals also offers Gold Bonds. Gold bonds are private securities and only available to accredited investors. Borrowers are companies that are looking to finance growth or expansion through gold-denominated debt. Gold bonds offer substantially higher returns than gold leases but have different risks. Our most recent gold bond pays 19% to clients.
Thank you for considering.
Keith Weiner, CEO of Monetary Metals
Mish Disclosure and Comments
I have an affiliate relationship with Monetary Metals. That means I am not an unbiased advocate. Having said that, I have known Weiner for many years, and I respect what he is doing at Monetary Metals.
One of the complaints I have heard over the years is “Gold earns nothing. It has no yield.”
That’s no longer true. Now you can earn interest on gold, paid in gold, at rates that are set by the free market, not by the Federal Reserve.
