Everbank's Gold CD

In a past posting, we discussed about a new type of CD investment from Everbank, which is based to the value of Dollar. Today we discuss another new type of CD-investment that is based on the value of Gold.

Everbank is an internet bank based in Jacksonville, Florida. Since October the bank is offering another innovative way of investing in gold prices. For a minimum investment of $1,500, Everbank is offering a 5-year certificate of deposit with the yield pegged to gold prices. This offers Gold's upside potential as well as its value as a hedge against inflation and other uncertainties. This financial product is a variant of "principal protected" CDs that are linked to the performance of stock indices such as the Standard and Poor's 500.

The CD's effective yield is equal to the percentage difference between the price of gold at the time of purchase and the average value over the time period that the CD is held. Because the average is used, the yield can potentially increase if the price of gold fluctuates rather than rises steadily. If gold prices reverse course, Everbank limits investors' risk by returning their initial investment if they hold the CD to term. The yield hits zero in that case and investors will have to forfeit a guaranteed 4.7% annual return that they could have earned on a safer traditional 5-year Everbank CD. That's the risk-part of this non-traditional CD investment.

On the other hand this is another investment vehicle for an individual to participate in gold without having to pay storage fees for the commodity, or pay a commission.