Investors want returns from stocks and bonds, yet they’re trapped in a scenario where bonds purchasing power is getting beaten down by inflation and equities have become a mine field with growth stocks experiencing painful declines.
The place investors have earned strong returns recently — gold — is set for a massive run up as investors rush to hedge against potential currency devaluations and supply shortages.
Even before the Ukraine war erupted, disrupting production and Russian exports, gold demand was outpacing supply. The World Gold Council Estimates that miners have historically extracted a total of 201,296 tonnes of gold, leaving only 53,000 tonnes left in identified underground reserves.
Major supply disruptions from Eastern Europe, with much of the world’s annual production, are sending gold prices on a rocketship ready ready for lift off. Now the Russian invasion of Ukraine threatens to disrupt supply from one of the world’s largest producers. Russian President Vladimir Putin is aiming for the same strategic prize that launched Hitler’s attack on Ukraine in World War Two.
How to Position Your Portfolio in Gold to Add Dividends
There is an interesting way that you can both earn the returns of gold and stack a compelling yield on top of it. The new GLDB ETF seeks to pay a consistent annual yield of 2.25% on top of the returns of gold. The Strategy Shares Gold Hedged Bond ETF (Ticker GLDB) is the only fund that both tracks the price of gold and pays monthly distributions from investment grade bonds. The fund invests in a total return swap contract that tracks the daily price moves of gold while also investing in a portfolio of investment grade corporate bonds that pay a compelling yield.
Most gold ETFs have seen their returns surge as gold prices have advanced, some even into double digits. However, total return is what matters to investors. Stacking a 2.25% yield on top of the return of gold is an easy way to enhance returns over time with the safety of investment grade corporate bonds.
The GLDB ETF has a full 100% exposure to gold that enables it to track the Solactive Gold Backed Bond Index. The Solactive Gold Backed Bond Index is comprised of a portfolio of investment grade corporate bonds that are fully hedged to the price of gold to protect against inflation. Since Solactive started tracking data on the Gold Backed Bond Index on Jan. 3, 2006, through its launch the total annualized return has been 14.57% annualized.
