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The Bullion Conundrum: Can you generate income from gold?

Posted December 25, 2007

"In a bull market this strong, why meddle with options at all? Why not just buy gold and hold it? Well, firstly of course, only an idiot would put all of his money into a non-yielding asset – or so your financial advisor would say. (Just ask him yourself; he could probably do with a laugh this Christmas.)" — Adrian Ash

Blogger's Note: Using a lunchtime lull in the holiday activities, I found this great article on the site of our friends of the Australian Daily Reckoning. Hope you find it useful!.

by Adrian Ash 

Baltimore — (TFN): One of the big stumbling blocks for investors thinking about gold is that it doesn’t offer to pay any income.

That’s why bone-headed gold schemes turn up like Simon Cowell at a Botox clinic.

But just as better living through chemistry can make you smile for a while, so “enhancing” the gold market looks doomed to leave your face sagging in the end. Gold Link Income Plus, a Sydney-based fund manager that floated on the ASX in July 2005, raised some A$150 million from investors (US$129m) since opening in 1998.

Now it’s got barely one dollar in seven to give back.

The 86% loss came after “seven really good years and one bad year,” as the founder, Richard Kovacs, told The Australian in early December. “That big loss has destroyed my business and my credibility.”

It has also left with A$20m earned in nine years, apparently, and the multi-level marketing-type name should have given it away – Gold Link Income Plus. But you might struggle, as we do here at BullionVault, to see quite how “gold” and “income” can ever sit together in the same product. Not one that actually keeps working, that is.

“The age old problem with bullion,” as the Sydney Morning Herald announced to its readers in Feb. 2006, “is that while gold might be pretty to look at, it hasn’t paid interest or dividends."

Is there a way around it that actually works? Read on to find out… 

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