What are Gold Bonds?
A Gold Bond is similar to a conventional dollar bond, except that the face value is denominated in ounces of gold, and the interest and principal are paid in gold. The gold bond issuer amortizes the bond from income the same way that a dollar bond issuer does.
Gold Bonds in the US
Gold bonds were common in the US, until 1933 when FDR signed Executive order 6102. This order made gold illegal to own by private citizens and nullified gold clauses. For more on the history of gold and money in the US, read this article.
It took almost 50 years before this law was undone. James U. Blanchard spearheaded a famous grassroots campaign that successfully led to the abrogation of Executive order 6102. Gold was legal to own again in the United States, and gold clauses in contracts could be upheld. This opened the door for gold bonds in the US to be reissued. However, gold was no longer part of the monetary system. People were operating with dollars in mind, even the buyers of gold. Nobody would issue a gold bond in the US.
Until Monetary Metals.
Monetary Metals issued the world’s first Gold Bond in over 87 years and plans to issue many more. To be notified about the next opportunity to invest in a Monetary Metals Gold Bond, sign up below.
Who Would Issue a Gold Bond?
Prospective issuers of gold bonds include companies who have gold assets and gold income. They want to borrow gold in order to match their liabilities to their assets, and avoid price risk. Issuers may include refiners, depositories, miners, and other businesses.
Any sovereign government that has gold mining activity in its jurisdiction is a great candidate to issue a gold bond. Not only are there fiscal benefits and reduction of risk to the issuer, but it offers exciting new ways of engaging with its constituency across partisan lines.
Monetary Metals’ CEO Keith Weiner is a member of the Arizona House of Representatives Ad Hoc Committee on Gold Bonds, to whom he presented the idea of a sovereign gold bond. Click here for a video of his presentation of the idea and download the report of the committee here. Companies or sovereigns who have incomes from production of other commodities (silver, copper) will also stand to benefit from issuing gold bonds.
How Does a Gold Bond Benefit the Investor?
The benefit of the Gold Bond to the investor is similar to that of a True Gold Lease. Monetary Metals gold bonds pay interest in gold, on the invested gold principal. Unlike a lease, a bond is a longer-term investment. Gold bonds, like dollar bonds, are securities. This is an advantage, as it gives institutions a way to own gold who are otherwise prohibited from owning a physical commodity. Gold bonds offer sophisticated investors the ability to express a long-gold investment thesis, with interest income. There are no storage and insurance costs.
If you’d like to discuss Monetary Metals gold bond investment opportunities further, you’re welcome to call one of our Relationship Managers at +1 (646) 653-9729. Or you can schedule a call. You can also sign up to be notified when the next gold bond opportunity becomes available.