We read lately in the financial press that some mining companies will begin paying dividends in gold or silver and not in cash. Some companies exchanged US dollars into metal in order to mint one troy ounce of gold and silver coins. Besides, some hedge funds have already allowed investors to denominate holdings in gold and exchange-traded funds backed by physical gold.

Although investors like the idea of receiving gold coins as dividends instead of cash (like dollars or euros), some critics say this is a dangerous trend.

a. Do you think that metal is now becoming an alternative investment vehicle?

b. Why do critics raise concerns about this practice? (Hint: think of the answer in terms of the demand for currencies like the US dollar and the euro.)

c. Can you think of any logistical problems that might arise when paying dividends in gold rather than in currency?