The traditional 60-40 stock-bond allocation could be facing a worthy competitor for the bond side of that equation—gold. The precious metal is riding the tailwinds of a strong rally, but could it really supplant bonds as the ideal safe haven of choice?
“In the past decade, a traditional 60/40 portfolio of stocks and bonds, as represented by the S&P 500 index and long-term government bonds, was a winner,” a Bloomberg article noted. “But with U.S. bond yields moving toward zero or even negative territory, it may be time to rethink that mix. One thought: How about swapping out some bonds for gold?”
“In normal times, bonds serve as a hedge against falling stock prices, because they tend to rise in value when equities slump in an economic downturn,” the article added. “But this relationship starts to break down when government bond yields stay down for long periods—especially when they’re low as a result of central bank policy.”
Gold Price in US Dollars data by YCharts
In the meantime, investors can get gold exposure via exchange-traded funds (ETFs). One fund to look at is the VanEck Merk Gold Trust (OUNZ).
OUNZ seeks to provide investors with an opportunity to invest in gold through the shares and be able to take delivery of physical gold in exchange for those shares. The Trust’s secondary objective is for the shares to reflect the performance of the price of gold less than the expenses of the Trust’s operations.
Each share represents a fractional undivided beneficial interest in the Trust’s net assets. The Trust’s assets consist principally of gold held on the Trust’s behalf in financial institutions for safekeeping.
OUNZ offers investors:
- Deliverability: VanEck Merk Gold Trust holds gold bullion in the form of allocated London Bars. It differentiates itself by providing investors with the option to take physical delivery of gold bullion in exchange for their shares.
- Convertibility: For the purpose of facilitating delivery, Merk has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
- Tax Efficiency: Taking delivery of gold is not a taxable event as investors merely take possession of what they already own: the gold.
As mentioned, one of the key benefits of OUNZ is the ability to exchange shares of the ETF for physical gold. Per the fund’s website, if you’re an “investor interested in taking delivery of physical gold in exchange for your OUNZ shares (Delivery Applicants), you must submit a signed Delivery Application to Merk Investments LLC (the “Sponsor”).
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