Good as gold. It's an old saying meant to assure you of undeniable quality and perfection. So you might define anything from a child's behavior to a promise you make using that term: good as gold. In fact, it's a term that was once used to define the U.S. currency, when our dollar was freely convertible into gold.

Because gold can neither be created nor destroyed, it has stood the test of centuries as a standard of value. Alchemists have tried in vain to increase the supply. Economists have tried in vain to deny its worth. But historically, gold has been a secure refuge in times of trouble or political uncertainty.

In our modern and complex society, gold retains much of that historic allure. But there are simply too many currencies and transactions for the world to hide all its fears by purchasing gold. Instead, currencies themselves are traded freely -- to the tune of $1.9 trillion of value every day!

Fear of inflation shows up in lower values for the dollar. But ordinary people in America are basically stuck with dollars. Even if the rest of the world worries about all the dollars the U.S. is borrowing or creating, Americans live, shop, work and save in dollar terms -- except for a few people who hedge that dollar bet in gold futures, gold stocks or mutual funds that buy shares of gold-mining companies. They've all been a great investment in the past two years, but they do entail some risk.

Alchemy: Savings Dollars Into Gold

Now, Everbank, an online bank that issues FDIC-insured certificates of deposit that are denominated in foreign currencies, has come up with a unique way to "invest" in gold, while giving a guarantee that you won't lose a dollar of your principal.

It's called the MarketSafe Gold Bullion certificate of deposit. It gives you 100% safety of principal, and FDIC insurance, along with a "market upside payment" that is equal to 100% of the percentage change in the average spot price of gold over the five-year term of the CD!

Here's how the Gold Bullion-linked CD works:

  • Minimum CD purchase is $1,500.
  • Term of the CD is five years.
  • There is a 0% interest rate and APY.
  • There are no account fees.
  • The total return is linked to the average price of gold.
  • There is no interest paid on the CD because your return is linked to the spot price of gold, which is considered the world's closing price for gold daily in terms of U.S. dollars and is established in London at 3 p.m. London time. Your "interest" payment at the end of the CD term is actually considered a "market upside payment" and it is determined by the price of gold on 10 specific, semiannual dates during the five-year term of the CD.

    At the end of the five-year term, the amount of your "market upside payment" equals the difference between the average price of gold on those 10 semiannual pricing dates, compared with the price of gold when you purchased the CD.

    These CDs will be issued in series, to simplify the pricing process. The first series will come to market Oct. 25, 2005. The base spot price of gold will be established on that date, and the semiannual spot gold pricing observations will be measured against the initial gold price when the CD is issued.

    Then, at maturity, you will receive either a guaranteed 100% of your initial deposit (if gold has fallen in price) or 100% of the average gain in gold, whichever is greater.

    As an example, suppose you purchased a $10,000 Gold Bullion CD that has a "base price" of $470. Then, over the next five years, the price of gold rises and falls but generally has an upward trend. Those prices are measured at fixed six-month intervals, and let's say the price of gold averages $618 on those 10 dates. Then, at maturity, your $10,000 CD would be worth $13,100.

    If the price of gold results in an average of less than $470 an ounce during those 10 observation dates, you'll get back your original $10,000 investment at maturity in five years.

    Special note. These CDs are not liquid, and money can be withdrawn only if the owner dies. And in that case, there is no guarantee of principal protection. They are not suited for tax-deferred accounts, such as IRAs.

    The first series of MarketSafe gold bullion-linked CDs will be issued Oct. 25, with subsequent series issued every month. For more information and a detailed explanation of the risks and guarantees, go to www.Everbank.com .

    They've finally found a way to turn paper dollars into gold. And that's The Savage Truth.
    Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column by the Chicago Sun-Times is nationally syndicated, and she released her fourth book, The Savage Number: How Money Do You Need? in June 2005. Savage also was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of the McDonald's and Pennzoil corporations.