Gold is an asset that has many potential intrinsic qualities that make it
unique and that, when added to an investment portfolio, can enhance
risk-adjusted returns. These intrinsic qualities include:
-
A Store of Value – Gold has been regarded in society as
a highly valued commodity for thousands of years and continues to be a
highly sought-after commodity to this day. It is relatively scarce in
quantity, difficult to extract and durable. Additionally, gold remains
one of the most liquid and widely accepted forms of exchange in the
world, and it cannot be printed like a fiat currency.
-
A Liquid Asset – Gold can be readily converted into
cash with essentially no impact to its value. There is a robust market
for gold, with large numbers of buyers and sellers, where a market price
can be determined at any given time.
-
A Safe-haven Asset – Without a large industrial
application, the value of gold is relatively insensitive to the
performance of the general economy. Gold also has a negative or low
correlation to the value of investments such as stocks and bonds. U.S.
treasuries are a competing safe-haven asset, and their yield often
represents the main opportunity cost of gold. Gold prices have an
inverse correlation with real interest rates and have closely tracked
total global negative yielding debt over the past several years.
In addition to playing a role as a safe-haven asset, gold in a portfolio can
also provide:
-
A Diversifier – Gold has historically had a negative or
low correlation to stocks and other financial instruments. Diversifying
an investment portfolio with the addition of gold can mitigate the
effects of market volatility.
-
A Hedge Against Inflation – Gold can be used as a hedge
against inflation because its price in U.S. dollars is variable. In
times of inflation, the U.S. dollar loses purchasing power while gold
tends to become more expensive – the cost of each ounce of gold will
increase as a result of inflation.
-
A Competitive Return – Gold is often viewed as an asset
based on an inverse relationship with the general economy – some
investors may decide to hold gold when the economy is suffering and sell
gold when the economy is booming. In reality, economic growth generally
leads to positive income growth, which can increase consumer demand for
gold.
Research, information and tools to help explain the role of gold as an
investment can be found on
www.gold.org/goldhub.
Royal Gold is a unique investment opportunity that employs a highly
efficient and versatile business model designed to provide exposure to
gold/metal prices and upside optionality, with reduced cost and operating
risk. The execution of our business model has been tasked to a team of
individuals with first class technical and financial expertise.
Key benefits offered by an investment in Royal Gold include:
Not Just Exposure, But Leverage to the Gold Price
Our high-margin business and the growth potential inherent in our asset
portfolio has historically provided Royal Gold more leverage to the gold
price when compared to a gold bullion ETF or physical bars and coins.
Compared to our closest peers, Royal Gold has the highest revenue exposure
to gold and, in terms of revenue sourcing, the highest exposure to primary
gold operations.
No-Cost Exploration Upside/Optionality
Royal Gold enjoys the benefit of potential reserve growth as operators seek
to extend mine lives by exploring for additional reserves at their existing
mine sites. Generally, Royal Gold is not required to directly participate in
the exploration expense or contribute to capital costs when operators add
additional reserves or increase production capacity at existing mines.
Portfolio Diversification that is Professionally Managed
Royal Gold owns a large portfolio of interests in high-quality, long-life
mines, development projects, and evaluation and exploration properties. The
majority of our revenue is generated from mines owned by some of the largest
mining companies in the world, from regions of the world that have shown
geopolitical stability. Furthermore, we have embedded growth from a suite of
owned interests in additional properties where reserves have been identified
and efforts are being made to develop the properties.
Dividends
In keeping with our commitment to provide a leading shareholder return,
Royal Gold has built a track record for returning capital to shareholders,
with an increasing annual dividend since it was established in calendar
2000. Royal Gold is the only company in the VanEck Vectors Gold Miners ETF
(the “GDX”) that has paid an increasing annual dividend since the GDX was
established in 2006.
Fixed-Cost Investments
In general, Royal Gold does not have to contribute to capital or operating
costs at the mining operations in which we have an interest. Therefore,
Royal Gold is not exposed to inflationary pressures that can erode the rate
of return expectations and profit margins of operating mining companies.
Free from these encumbrances, our cash flow is of the highest quality.