Participating in the upward price movement of gold and silver can be somewhat risky for many investors. But what if an investor could get into the precious metals market and benefit from price upswings without risk to their principal?
EverBank has attempted to make this scenario a reality by creating the MarketSafe CD, a certificate of deposit that allows investors to invest in the precious metals market without having to worry about losing their principal.
“When I talk to audiences at investment conferences, I always ask for a show of hands of how many people would like to participate in the price action of gold and silver. At least 90 percent of the hands go up,” Chuck Butler, president of EverBank’s World Markets Division, said. “When I ask if they would like to participate in those prices, but not experience any principal loss, then everyone’s hands go up.”
The five-year CD, when opened, is priced at the cost of gold on the London morning fix on that particular day, a price set by five members of the London Gold Pool, Butler said. Every six months after that, EverBank records the spot price of gold. At the end of the five-year period, EverBank takes the average of those spot prices to return to the investor.
“Any price above [the starting price], you get 100 percent of your return,” Butler said. “If it’s lower, then you get principal back…If gold started at $825 and made a linear move of $300, you would end up getting about half of that because of that averaging. But if the price goes up and down and up and down…you’re going to outperform the market because of the averaging.”
EverBank runs a funding period every month, so investors may have to wait a short time before having their money invested. However, during the funding period, the money allocated for the MarketSafe CDs sits in an account earning the highest interest EverBank offers. When the CD is opened, both the principal and interest from that account are put into the CD.
While some investors may wonder whether investing in precious metals right now is wise, because the price of most metals has been climbing for the last five years, Butler said he thinks the price of gold will continue to rise.
“History shows us that every time there’s been a bull commodity market, it’s lasted anywhere from 17 to 22 years,” Butler said. “So really, the commodity market that’s been going on right now…five years is a very small portion of that time.”
Even if the market does go down, MarketSafe CDs will allow investors to get their principal back no matter what, Butler said.
MarketSafe accounts are FDIC insured and require a minimum investment of $1,500. For more information, visit EverBank’s website.