Gold stocks now yield more than 10-year U.S. Treasuries

07/12/2012 3:14 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

A funny thing has happened to gold stocks as a result of the current sell-off: Many of them now pay a higher yield than do 5-year U.S. Treasuries. A few even pay more than a 10-year Treasury.

Yep, the long-term knock on gold stocks—that they don’t pay anything while you wait for long-term inflation to eventually create a rally in gold prices—is no longer true.

Here are some of the numbers.

The yield on the 5-year U.S. Treasury is 0.63% today, July 12. And 1.48% on the 10-year Treasury.

The yield on shares of Goldcorp (GG), slammed yesterday after the company cut projections for 2012 production http://jubakpicks.com/2012/07/11/short-term-production-problems-create-buying-opportunity-in-goldcorp-if-youre-building-a-long-term-inflation-hedge/ ,  stands at 1.66% (Goldcorp pays its dividend monthly, by the way.) For Yamana Gold (AUY) the yield is 1.81%. For Newmont Mining (NEM) the yield is 3.09%.

I leave it to you to decide whether Treasuries or gold carry more long-term risk from rising inflation. And whether U.S. interest rates and yields on Treasuries will continue to fall in 2012 (which would result in gains in Treasury prices.)

(My answers for what they’re worth are that Treasuries carry more long-term inflation risk than gold since the price of Treasuries will go down and the price of gold up in the event of inflation, and that Treasury yields are likely to fall—and therefore Treasury prices to rise—for the rest of 2012.)

 

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Goldcorp and Yamana Gold as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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