Gold-linked bonds are made available by some of the world’s largest investment banks and bullion dealers. They provide customers yield, protection of the principal and an exposure to fluctuations of the price of gold. Gold-linked bonds are usually issued to an investor when the principal and interest are to be repaid along with an equivalent gold amount. Other than investment banks and large bullion dealers, they can also be issued out by any other company that wants to hedge their exposure to gold.
Investments in gold-linked bonds protect the investor from imminent traumatic world events that may result in economically fatal consequences. Gold-linked bonds have a high liquidity, hence can be divested or sold off when the investor is in need of cash.
Structured notes, on the other hand, allocate a portion of the sum invested to the purchase off put and or call options. In essence, a structured note contains two elements: the bond which protects the principal and making up about 80 percent of the total investment and the remaining 20 percent which is invested in a financial derivative. Since the investment bond in a structured note could be designed to provide a return that equals the initial investment, the principal will be protected. The element of the derivative offers the investor with the potential to earn more profits when compared to a standard deposit.
The terms for a structured note are usually between 1.5 years and 6 years. As an investor, this is prime time to tie up one’s money for that period of time. This ensures that the principal amount is protected. Depending on the technical structure of a note, they can offer protection for capital and a variant degree of participating in the fluctuation of prices. The structure of the note naturally varies with the prevailing market conditions and the preferences of investors.