What is a Gold Lease?
In a Gold Lease, investors who want to earn gold for the use of their gold are matched with businesses that use gold productively. This innovative gold fixed-income product is designed to produce interest income on gold, reduce risk for the investor and be tax-efficient.
So how does a gold lease work?
The process begins when Monetary Metals® identifies a business that needs gold inventory or work-in-progress (e.g., a jewelry manufacturer). If it was any other commodity, the company would borrow cash to buy the necessary raw materials. However, the gold price can 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 constant need to roll their short futures contracts.
Acme would benefit greatly from a gold lease. It simplifies their financing, eliminates 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, possession of the gold without the problems of owning it. Gold Financing, Simplified™.
Monetary Metals® facilitates the matching of investors and businesses, with a fixed fee. We don’t set the lease rate. Our vision is to create a transparent and open market, the Gold Yield Marketplace™.
Monetary Metals® performs its due diligence before offering a gold lease to investors. We work exclusively with companies that use gold productively–and have physical gold. We will not offer a gold lease that could 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.
We present the terms of the lease and the result of our due diligence to investors for review. Then it’s up to you. If you want to participate, you make an interest rate offer for that particular gold lease. Your gold won’t go into the lease unless the interest rate clears at your offered rate or higher. Once accepted, your gold will start generating gold interest on a monthly or quarterly basis, deposited directly into your Monetary Metals® account.
How to start earning interest on gold in a true gold lease – next steps
If you are ready for your gold to start working for you in a Monetary Metals® True Gold Lease, the first step is to open an account. Opening an account is a simple process. You can get started here: Open an Account. Please note the minimum account size is 10 ounces of gold.
Want to learn more about Monetary Metals’ True Gold Leases? Access a presentation with more information here: Download the Presentation. Or fill in our inquiry form on the right to have a Relationship Manager send you additional information.
Curious about our track record? Check out our funded deals page.
How do Monetary Metals’ True Gold Leases compare to conventional bullion bank leases? Read this article.
Want to see a list of upcoming true gold lease opportunities? Click here.