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Does Gold Have a Yield?

“You want to be in assets that have a yield and gold doesn’t have a yield.”

— PAUL KRAKE

While neither true nor relevant, the “no-yield” fallacy concerns many. Let’s dissect this unfounded belief.

Truth

 Gold has performed more than 340% over the last 15 years. The yearly average return of 22.66% obviously disproves the above statement (Kitco Historical Charts). But travel a step further with me.

If you compare the Dow Jones Industrial over the exact same time period of 15 years, it returned just under 150% or approximately 10% per year (Bankrate.com). Or, if you would have had three 5-year CD’s, you would have netted 7.88% or just over .5% per year (Yahoo Finance).

After establishing truth, let’s consider the relevance of the “no-yield” if it had actually been factual.

Relevance

Gold is money. While we often refer to precious metals as “investments” or “commodities,” gold and silver perform as neither.  They perform as money.

And, money shouldn’t have a yield.

 Yet, Gold does have yield, because our dollar performs as devaluing money. Due to the relationship between gold and the U.S. dollar, gold and silver can often help offset dollar-based investment losses. However, gold performs as money overall. According to the U.S. Bureau of Labor Statistics, since the existence of the Federal Reserve in 1913, the U.S. Dollar has lost 95% of its purchasing power. Gold has lost zero.

“Gold is not an investment, because it has no risk and no return (. . .) Of course, the dollar price of a gold ounce may have changed radically in ten years. That’s not a gold problem; it’s a dollar problem. ”

— JAMES RICKARDS

Let’s consider gold’s relationship to something other than the dollar – oil. Oil is required for production and distribution of most goods we purchase and, of course, how we fuel our cars. When oil rises, typically prices rise for many other goods such as groceries.

Not unique to oil, gold has had consistent purchasing power of gasoline, groceries, housing costs, etc. Precious metals stand alone as one of your safest long-term investments.

If you or your clients feel concerned over a commonly held myth, find reassurance knowing precious metals add a healthy diversity and unparalleled “insurance” to any portfolio.