Gold is an important strategic asset with unique characteristics, and Royal Gold provides an alternative to investors who want exposure to gold with additional potential upside from higher prices, production expansion and exploration success, while reducing downside risk from direct exposure to operations.
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.
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.
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.