An Internet-based bank in Florida is offering an innovative way of tapping into the rise in gold prices without exposure to the traditional volatility of commodities.

For a minimum investment of $1,500, Everbank, based in Jacksonville, is offering a 5-year certificate of deposit with the yield pegged to gold prices. This offers the metal's upside potential as well as its value as a hedge against inflation and geopolitical uncertainty. If gold prices reverse course, Everbank limits investors' risk by returning their initial investment if they hold the CD to term.

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.

Investors have deposited almost $25 million in Everbank's gold CDs since they went on the market in October, said Chuck Butler, president of Everbank's world markets desk.

"This is a way for an individual to participate in gold without having to pay storage fees for the commodity, or pay a commission," said Butler.

The CD's effective yield is equal to the percentage difference between the price of gold at the time of purchasing the CD 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.

The price of gold has risen fairly steadily from $270 an ounce in 2001, according to figures provided by the World Gold Council. On Thursday, gold closed at almost $550 per ounce.

Of course there are other ways of betting on gold, such as mutual funds that invest in bullion or shares of gold-mining companies. But these are not perfect vehicles for investing in gold because the health of mining companies depends on factors beyond gold prices such as management decisions and political stability in the regions where mines are located.

Conversely, the only risk in Everbank's FDIC-insured gold CD is the opportunity cost. If gold prices fall below the level when the CD is purchased, then the yield hits zero. Investors will have forfeited a guaranteed 4.7% annual return that they could have earned on a traditional 5-year Everbank CD.

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