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MONEY COMMENT
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According to our office dictionary, gold is "a soft, dense, yellow, chemically unreactive precious metal." Perhaps Barclays (LSE: BARC)(NYSE: BCS) thinks that British investors are pretty soft, dense and yellow as well, judging by its latest product launch! Recent economic and geopolitical instability has increased the public perception that gold is a safe haven in troubled times. Barclays is taking advantage of this investor uncertainty by launching two bonds linked to gold prices. The bonds, which tie up your money for six months and guarantee your capital in full, are aimed at affluent investors. Here are the details: Bond 1: if the price of gold rises by 10% or more between 19 May and 19 November, you receive a return of 5%, an annualised equivalent return of 10.25%. Bond 2: if the price of gold falls by 10% or more over the same period, you receive a 5% return (10.25% AER). Investors hoping to exploit the volatility of gold prices can invest in both bonds and make 2.5% (5.1% AER) if the price goes up OR down by 10%. The minimum investment in any bond is a mere £50k (!) and the maximum £1 million. The bond is being marketed via Barclays' wealth management arm, Barclays Private Clients Premier Banking. Can you spot the problems? If the gold price goes up or down by 10%-plus, your return is limited to 5%; Barclays takes any excess return over 5% (to pay for your capital guarantee). What's even worse is that you get no return at all - zilch, nada, zip - if the price of gold fails to rise (or fall) by at least 10%! Yet again, we're being offered a product to meet a need that doesn't exist. If you believe that gold will return more than the stock market this year, buy gold. Alternatively, you can buy mining shares, which generally reflect the rise (or fall) in the gold price. Just as magnets don't attract gold, I'm not attracted to these bonds and I'm hoping wealthy punters will feel the same. Then again, I could be wrong, as products that guarantee your capital while offering exposure to the stock market are attracting many cautious investors. However, the capital guarantees you're given erode your overall return so much that, in general, you'd be better off investing directly in the underlying stock market, metal or mineral. Many similar guaranteed stock-market products have been launched in the current bear market, all of which prey on investors' desires to beat the returns from deposit accounts while preserving their capital. Usually, the charging structure is completely impenetrable, as with my D'Arcy Golden Bond. As for me, I'll always give so-called "guaranteed" products a wide berth, as they never stand up to my number-crunching. In my Foolish opinion, the only guarantee you have is that you're almost always better off investing elsewhere! More: Gold discussion board | Hidden Costs Of Guarantees |Guaranteed Stock Market Returns | More Guaranteed Returns