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By Brad Zigler

Real-time Monetary Inflation (last 12 months): 2.2%

The gold market's been a money maker for lots of people: bullion holders, owners of gold grantor trusts and mining stocks, and yes, even some people turning in their scrap gold to refiners. Oddly, the stockholders of one such refiner have been losing lately.

Last May, Money4Gold Holdings, Inc. (MFGD)—'til then a development company—completed its acquisition of MGE Enterprises Corp., a company doing business under the name "MyGoldEnvelope.com."

MyGoldEnvelope, like many other firms of its type, makes heavy use of television to solicit owners of jewelry and scrap gold to sell their metal for its melt value. In the eight months since the acquisition, MyGoldEnvelope has expanded its operations outside the United States, to Canada, the United Kingdom, Ireland, Germany, Austria and Spain. Nearly two-thirds of the company's revenue is generated outside its U.S. home market.

As a marketing affiliate of the Republic Metals Corp., MyGoldEnvelope has collected a lot of gold, some of which is lining its principals' pockets. Gross profits ballooned 527%, at last look, while selling, general and administrative expense rose 189%.

A lot of that expense comes in the form of stock-based compensation. MyGoldEnvelope uses its stock as currency for a lot of its dealings, including executive compensation. More accurately, the company allows its stock to be diluted in these compensation deals.

Family of the company's chief financial officer, in particular, were particularly busy in late 2009 converting preferred stock into 2.6 million common shares. In two such transactions alone, the company float expanded 1.5%, which may explain why the company's share price ratcheted downward at a time when revenues and gold prices were rising.

Money4Gold Holdings (MFGD) Share PerformanceMoney4Gold Holdings (<a href='http://seekingalpha.com/symbol/mfgd' title='Money4Gold Holdings, Inc.'>MFGD</a>) Share Performance

MFGD's stock price is now on the rebound, but is still under water. The stock's lost nearly 19 percent since last May, while holders of the SPDR Gold Shares Trust (NYSEARCA:GLD) and the Market Vectors Gold Miners ETF (NYSEARCA:GDX) enjoy 28% and 49% gains, respectively.

MFGD shares are more volatile than the other two gold issues as well, which may give the stock the means to ultimately outperform (we examined the risks attached to gold shares in a recent feature, "Gold Stock Volatility's Double Edge"). MFGD's annual share price volatility is three times that of the GDX miners portfolio and nearly eight times as risky as the GLD bullion trust.

The potential for outperformance, of course, depends on how many dilution surprises lie ahead.

Source: Gold Stock's Reverse Leverage