IN THESE post credit crisis days, true innovation in the shell-shocked world of money is a rarity. Mistrust of the financial industry, central banks and fiat currencies, however, is ubiquitous.

So a new breed of security that combines innovation and mistrust is noteworthy.

FirstRand, South Africa’s second-biggest lender, has created what seems to be the world’s first fully gold-denominated bond, borrowing R2 billion for five years.

Investors have to pay for their bonds in Krugerrands, gold coins minted by the South African government with one troy ounce of the metal.

One of the charges levelled against gold – a “barbarous relic” in the sweeping judgement of John Maynard Keynes – is that you don’t earn interest or dividends on the precious metal, while the FirstRand bond offers 0.5 percent. At its expiry the value of the bond is determined by the current gold price, the dollar/rand exchange rate and the interest earned. This interest is calculated in terms of ounces of gold as represented by Krugerrands. On maturity investors may take physical delivery of the Krugerrands or opt to get settled in cash.

The idea of tempting investors to lend money with the promise of repayment in gold isn’t new. In the half century leading up to the Great Depression in the 1930s, US railroad companies relied on gold bonds to finance the expansion of their networks.

In 1873, for example, the Chicago, Saginaw & Canada Railroad Company issued 5 500 gold-backed bonds, each with a face value of $1 000, offering 7 percent interest for 30 years. Three years later, the company went bust and investors got back less than 25c on the dollar, according to the US Treasury website.

In Tom Wolfe’s novel The Bonfire of the Vanities, bond trader Sherman McCoy tries to cement his status as a Master of the Universe by cornering the market in “Giscards”, gold-backed bonds purportedly issued by the French government.

The novelty of the FirstRand project is that the initial purchase is made in gold; and, unlike the railways, the borrower has a natural protection against a surge in the price of the yellow metal, since the bank plans to use the proceeds to fund its gold-trading adventures.

Krugerrands of 1 ounce now trade at about $1 295, according to Bloomberg data, down from as high as $1 406 in March and a September 2011 value of $1 882.

We learnt last month that a company called Anthem Vault wants to create the world’s first virtual money backed by gold. In these times of financial repression, I’m willing to bet that more securities will emerge tied to the value of gold.

These will no doubt appeal to the distrustful crowd who are convinced that the experiment of showering the world with central bank cash will end in tearful inflation.

Mark Gilbert is a Bloomberg columnist.