4. Gold Pays No Dividend
It’s true, gold doesn’t pay a dividend. It has no earnings. It’s not an investment. There is no way to value it using traditional measures of stocks and other financial assets.
Gold’s benefits comes during periods when real dividends and income-producing assets’ yields are so low, gold is a much better alternative. These periods where gold outperforms income-producing assets is when real interest rates (interest minus inflation) are negative.
Consider this, a long-term U.S. Treasury bond currently pays about 4% per year. Inflation, as tracked by rising cost of living and excluding housing price declines which have kept official inflation numbers down, is greater than 5%.
As a result, the real rate of interest is a negative 1%. In real terms, it costs 1% a year to hold the long-term Treasury bond even though it yields 4%.
This is why investors turn to gold when interest rates are negative and gold prices are driven higher by negative real interest rates.
Gold pays no nominal dividend or income. But it does retain its purchasing power while other income-producing assets decline.