Monetary Metals has issued the first of a series of interest-paying gold bonds to finance a gold mine in Western Australia, the Scottsdale, Ariz.-based company announced recently.
It is the first bond issued since the 1930s that pays interest to investors in gold, according to company CEO Keith Weiner. The first bond in the series, Monetary Metals Bond I, closed in December and will pay 13% over 12 months. Other 12-month bonds will be issued and will pay lesser interest rates. The minimum investment is $20,000.
Gold has gained in popularity as interest rates remain low and the dollar is relatively weak. Gold finished 2020 up 25%, according to the World Gold Council, and some analysts and advisors see a continuation in 2021.
"Precious metals can help solve some of the unique challenges facing investors,” in the current low-interest rate environment, explained Weiner, who also is president of Gold Standard Institute USA. “It is imperative to position portfolios to manage volatility while anticipating the long-term impacts of recent massive economic events.”
Monetary Metals provides a platform that offers investors a yield on gold, Weiner said. He added that gold is an attractive investment as a portfolio diversifier because it is not correlated to other assets, and that investors typically have to pay for storage and insurance for gold but that buying a bond eliminates that cost.
“People are losing faith in paper currency and see gold as a valuable alternative,” he remarked. "It can be the currency of last resort.”
Gold investments performed well in 2020, breaking records for inflows to gold-backed ETFs for the first three quarters, according to Juan Carlos Artigas, head of research for the World Gold Council, a marketing and development organization. Inflows slowed in the fourth quarter, but economic conditions indicate the demand for gold will continue, he said.
The World Gold Council developed Qaurum, a web-based tool that helps investors measure and understand the economic factors that affect the gold market. The council created “GoldHub," an open access data site for people to find data and insights on gold..
“Gold is not just an investment,” Artigas said. “It is also used in jewelry and in high-end electronics. 2020 was disruptive, but as the economy improves the performance of gold will be driven by supply and demand. Gold can help provide a hedge for a portfolio against some risks.”
One of those risks is a weakening dollar caused in part by the federal government's massive Covid-19 stimulus packages, according to William Rhind, CEO of ETF sponsor GraniteShares. Its gold-backed GraniteShares Gold Trust has $1.1 billion in assets.
“Gold should be a part of everyone’s portfolio. It is a diversifier that can protect against a downturn like the one that occurred last March,” Rhind said. His take is that investors should allocate 5% to 7% of their portfolio to gold.