If you’re ready to learn more about Monetary Metals’ Gold Fixed Income offerings, we encourage you to receive our free white paper, A New Way to Hold Gold .
The drawback to owning gold and silver conventionally is that they earn no yield. If you own 100 ounces today, you’ll still own 100 ounces ten years from now (less, if you pay to vault it). If the price of gold rises, then you have a capital gain. But the only way to generate an income from gold, is to sell some of it. There are two problems with this approach. First, the price does not always go up. And, second, your total gold holdings are dwindling, a few ounces every year.
Monetary Metals is changing this. Our Gold Fixed Income product enables investors to own gold and generate an income, without liquidating it. This offering pays interest on gold – in more ounces of gold – so that your total holdings increase year over year, regardless of the dollar price.
At 3.0% annual interest, 100 ounces compounds to 134 ounces in ten years.
Monetary Metals generates interest on gold by matching investors who own gold, with businesses that use gold productively. They are happy to pay interest in order to lease the metal they need. Title to the gold stays with the investor and we work exclusively with companies that use physical gold productively, so the leased gold is always present and under controls. We do not lease out gold for short selling, or derivative transactions.
Then it’s up to you. You’re in charge. For each opportunity, you choose the quantity of gold you want to lease and the interest rate you want to earn. Your gold will only go into a lease if you accept the rate.
Monetary Metals was founded upon the philosophy that people invest to grow their wealth during their working years, and then retire on the income it generates Hoarding gold is not investing, as the number of ounces held remains the same. Investors need to be able increase their gold. They need to be able to earn a yield on it. Now they can, with Monetary Metals’ Gold Fixed Income.
Investors face a challenging environment today. With interest rates having fallen for decades, they are forced to choose between earning poor returns in bonds or speculating on asset prices. In addition, debt levels have skyrocketed, and there is a growing risk of default. For this reason, many people look to the safety of hard assets such as real estate and fine art.
The advantage of a hard asset is that it is not anyone else’s liability. It cannot default. However, most hard assets are not financial assets. Most hard assets are illiquid even under good market conditions. The exception to this is gold (and silver). Gold’s tight bid-ask spread makes it a liquid asset. When you buy in, you do not incur high costs. And, perhaps more importantly, when you sell, you do not lose much.
There is a problem, however, with conventional gold ownership. Holding gold incurs perpetual storage and insurance costs. This is a negative yield in gold terms (though if the price of gold rises, there is a gain in dollar terms). Over time, you are losing gold, like water dripping through a leaky faucet.
Monetary Metals' Gold Fixed Income offering was designed as a solution to this problem. It’s for investors who are looking for a way to earn a positive yield on gold—in other words, interest on gold, paid in gold.
The process begins when Monetary Metals identifies a business that has a legitimate need for gold inventory or work-in-progress inventory (e.g., a jewelry manufacturer). If it were any other commodity, the company would borrow cash to buy the necessary raw materials. However, the gold price can often move more in a day than the gross profit margin on the product. Consider a simple example. Acme Inc. borrows $1,000,000 to buy $1,000,000 worth of gold. It makes 3% gross profit, meaning the finished goods sell for $1,030,000. However, during the manufacturing process, suppose the gold price drops 5%. The raw gold is now worth $950,000. The finished product with 3% markup is $978,500, and Acme loses $21,500.
To avoid the price risk, most gold businesses would sell (short) futures contracts. This solves the price risk problem, but it brings its own costs and risks, such as having to borrow additional cash for the margin on the futures contract and having a constant need to roll their short futures contracts. Additionally, managing a futures book is not a core competency of their business. In the example above, Acme would benefit greatly from a Monetary Metals gold lease. It simplifies their financing, eliminates the price risk along with the need for hedging, and saves them money. They just need some gold, and they don’t want so many moving parts. In other words, they want possession of the gold without the problems of owning it. Gold Financing, Simplified™.
Monetary Metals performs its due diligence before asking you to entrust a company with your gold. We work exclusively with companies that use gold productively–and have physical gold. We will not lease gold to be used for short selling or other derivative transactions. We work out the best type of lease to finance the business, and put together the terms of the deal. Then it’s up to you. You’re the owner of the metal. If you want to participate, then you make an interest rate offer. The business does not get the gold unless it’s willing to pay your rate, or higher.
Monetary Metals facilitates the matching of investors and businesses, with a fixed fee, typically 2%. For example, a lease deal is brought to investors and closes at a 3% interest rate. You the investor earn 3%, Monetary Metals earns its 2% fee, and the lessee pays 5% interest overall. We’ve closed deals with gold manufacturers, bullion dealers, wholesale jewelers and more. And our pipeline for new deals is active and growing. We don’t set the lease rates. Our vision is to create a transparent and open market, the Gold Yield Marketplace™.