Gold vs Bonds – How to invest in gold and generate yields

Find out how gold can now earn a recurring passive monthly yield, making for a lucrative investment.

Weighing up the investment options on the financial market can present a dilemma when choosing between the safety of gold, as a traditionally stable asset, and the yield-bearing potential of bonds.

Gold vs. Bonds

Both bonds and gold are widely considered to be low-risk investments. 

When speaking of bonds, we are referring to fixed income instruments that represent a loan made by an investor to a borrower eg. government, or corporate bonds. They are often understood as an I.O.U („I Owe You“-  a signed informal notice of an unpaid debt) between a lender and borrower, including details such as the date when the loan will be paid back, and the terms of variable or fixed interest made by the borrower. 

Of course, the risk is never completely absent from any investment, especially in the short term, where market volatility plays a significant role in manufacturing risk. 

Bonds have experienced a historic low in their interest rates recently, transforming them into an incredibly cheap investment worth considering. 

If interest rates do eventually start to climb again, this would offer investors a modest recovery on the yielding potential of their bonds. However, the spot price of bonds that are already in circulation would be hit – particularly those which have the longest maturity.

While the outlook for bonds appears gloomy, the future of gold presents itself much more optimistically. Indeed, investors anticipating the long-term benefits of holding gold have rarely been disappointed.  

Gold experienced a pivotal moment in economic history when president Nixon announced on the 15th of August 1971 that the US would stop trading gold for dollars at the fixed rate of $35 an ounce – otherwise known as the fall of the Bretton Woods Agreement. Fifty years after its collapse, gold has increased in price 50 times over.

Bullion Reaching New Heights

Bullion reached a historical peak in its pricing of $2,074 an ounce last summer, before slipping back to under $1,800. Despite this, the long term trajectory of gold remains positive, in accordance with our recent market analysis. 

In contrast, Treasury Yields still seem to be caught in a long-term bearish trend. As inflation rises, the yielding potential, for the majority of bonds in many economic areas, such as the European Union, Switzerland and Japan,  is still below zero. The U.S. rate hike forecasts are just as underwhelming, with most Federal Reserve officials expecting the first interest rate increase – only by 1% – in 2023.

This means that investing in bonds, with a projected maturity time of one to five years, is generating a negative return or loss for investors who have parked liquidity there. 

Of course, gold and bonds are likely to appear in the portfolio of any investor, but their roles are very different.

Gold has always been a safe haven for investors. Its function, as an asset that protects wealth, will become even more effective if the markets experience uncertainty and crisis. 

With a focus on stocks, which have skyrocketed over the past 15 months, investors can expect to observe the turbulent lows and highs of the market. Just since the low of the Covid-19 pandemic, the  S&P 500 (a stock market index tracking 500 publicly traded domestic US companies) has already doubled in value to the current state. 

It seems that sooner or later, there will be new corrections as the market responds to the dramatic shifts and changes, making gold the safest store of value for every investor. 

Earning a Yield on Gold

As opposed to bonds, Kinesis gold (KAU) and silver (KAG) offer investors a recurring and reliable monthly yield, paid directly into their Kinesis accounts – for life. Rather than waiting to utilise their investment, as is the case when awaiting bond maturity, participants of the Kinesis system experience a sense of immediacy, with the ability to spend, send and transfer their KAU and KAG as physical-digital currencies, just like regular cash. 

By holding Kinesis gold and silver, investors can access the yield-bearing benefits, traditionally associated with bonds, coupled with the appreciating value of gold as a stable asset. In other words, the best of both worlds.

Not to mention, on October 6th 2021, Kinesis paid out a 6.99%* annual yield on gold that competes with and, in many cases, outperforms traditional investment options in the market like property, bonds, bank deposits, and dividend-yielding stocks.

Find out more about the yielding potential of gold.

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*Yields will fluctuate based on transaction volume. Please note that past annual yield figures, taken from Kinesis’ Holder’s Yield, October 6th 2020 – October 6th 2021, are not indicative of future figures.

Carlo Alberto De Casa is an external Market Analyst for Kinesis Money.

He also writes as a technical analyst for the Italian newspaper La Stampa.

Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018.

This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.