The flaw in Wall Street’s gold argument

For decades the case against gold fit in one sentence: it pays nothing.

When Treasuries yield five percent, holding a zero-yield metal has a cost. Every basis point higher makes gold more expensive to own. That was the argument.

In recent weeks it got its best test in nearly twenty years.

The 30-year Treasury yield climbed to its highest level since before the 2008 financial crisis. The 10-year touched 4.73%, its highest in more than a year.

By the old logic, gold should have buckled.

Instead, gold rallied while the dollar slid to a three-month low.

That's one half of the argument in trouble. What about the other half, the part that says gold can't pay a yield?

Monetary Metals clients can lease their metal to qualified businesses and earn up to 4% yield on gold, paid in gold.

Not dollars. Ounces.

Leasing doesn't eliminate price volatility, but it does mean "gold pays nothing" is no longer true.

And what does that Treasury yield actually pay for?

The same week yields peaked, the national debt passed $40 trillion, and the Treasury announced it would at least double its buybacks of long-dated debt, from $2 billion to at least $4 billion per operation, after a buyers' strike at the long end that began in late June.

The relief lasted about a day before yields climbed right back.

A bond's yield is not a gift. It's compensation, paid by a $40 trillion debtor that is now intervening in the market for its own debt.

Treasuries pay their yield in dollars; the same unit the borrower can issue more of.

Gold leases pay their yield in ounces, a unit nobody can print.

Wall Street's case assumed the metal could only sit there while bonds did the earning.

Neither half of that assumption survived the month intact.

The argument was that gold just sits there. Retire the argument.

Your gold is already an asset. Could it also be an income-producing one? 

See if gold leasing is right for you.