In the spring of 2023, State Street Global Advisors conducted a Gold ETF Impact Study in the United States (US) to understand current investor sentiment towards gold. As we analyzed the data, some interesting trends emerged.
Having spent the whole of my 50-plus year career in the gold business, I’ve often felt that people my age — and older — have the best understanding of the merits of gold as an investment. In the interest of full disclosure, I was born in 1947. This makes me one of the oldest of the Baby Boomer generation. When I pause to consider this proposition, I can see some logic in it.
Who better to understand the realities of gold’s role as a hedge against inflation than someone who lived through the high inflation of the 1970s, when annual gains in the US Consumer Price Index reached 13.5%, the highest level since the periods immediately following the two world wars? Who is in a better position to appreciate the protection gold can offer as a hedge against weakness in the equity market than a witness to the biggest one-day drop in the history of the stock market on Black Monday in 1987, or the Global Financial Crisis of 2008? Or see the protection gold can offer against weakness in the US dollar, like we experienced in 2011 and 2012?
These seem like very logical reasons why my Baby Boomer generation might have a superior appreciation for the benefits of owning gold…but are, in fact, all wrong.
Recently, SPDR ETFs conducted a Gold ETF Impact Study in the US which found that Millennials have a greater appetite for gold than Boomers and Generation X. Color me surprised!
Among the investors in this study, on average, Millennials have a higher allocation to gold at 17%, with Boomers and Gen X lagging behind at just 10%. And Millennials reported a greater appreciation for the convenience of investing in gold through exchange traded funds (ETFs). More Millennials than Boomers or Gen X replied that gold ETFs are the best way to invest, with 69% for Millennials, compared with Boomers at 55% and Gen X at 35%. And how did Millennials leapfrog over Gen X? So many points of consideration. It’s a lot for this Baby Boomer to digest.
With recession risk still looming, the allure of gold as an investment in today’s market environment continues to be very strong. Among investors who hold gold, more than half of all respondents said they expect to increase their gold holdings in the next 6 – 12 months. At 57%, the percentage of investors in gold ETFs who plan to buy more slightly outweighed investors in other gold investments such as bars and coins, gold mining company stocks, gold futures and options, and commodity funds at 53%.
Among investors familiar with gold ETFs, 60% said they believe gold ETFs are the best way to invest in the commodity. The three most important perceived benefits of gold ETFs are:
A full 88% of respondents who currently have gold in their portfolio said they believe gold is a long-term strategic investment. Almost three-quarters (71%) said holding gold has improved the performance of their investment portfolios.
Study respondents who have gold in their portfolios felt that the primary benefits of owning gold are its potential to either maintain or increase in value during an economic downturn (68%), diversification (67%), and its role as a hedge against inflation (67%).
The survey also revealed that 80% of all investors believe gold will always have a monetary value, but only 41% said they understand the factors that influence the price. By comparison, among investors who already have gold in their portfolios, 75% said they understand the variables that have an impact on gold’s price.
Perhaps unsurprisingly, 75% of those surveyed who are familiar with gold ETFs responded that ETFs are a more cost-effective way to invest in gold. But it’s interesting to note that the study also found that investors who hold gold ETFs are more likely to be optimistic about their financial futures (83%) than those who do not (73%). Gold ETFs have proven to be resilient during times of market turbulence, and the three Rs of rates, recession and risk seem set to remain key drivers for gold prices and investor demand for the remainder of the year.
The Gold ETF Impact Survey indicates that there is still significant room for investor education about the benefits of gold and the role it can play in a portfolio. As the industry continues to improve education around how to invest in gold and the portfolio benefits it can provide, we expect to see further growth in gold investment demand.
State Street Global Advisors Gold ETF Impact Survey, March – April 2023. State Street Global Advisors, in partnership with A2Bplanning and Prodege, conducted an online survey among individual investors in the US. Data was collected from March 24 to April 19, 2023, from a nationally representative sample of 1,000 adults ages 25+ who have investable assets of $250,000 or more. Seven individual investors who self-reported holding a gold ETF(s) from the online survey participated in a follow-up qualitative phone interview.
Information Classification: General
All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Investing in commodities entail significant risk and is not appropriate for all investors. Commodities investing entail significant risk as commodity prices can be extremely volatile due to wide range of factors. A few such factors include overall market movements, real or perceived inflationary trends, commodity index volatility, international, economic and political changes, change in interest and currency exchange rates.
Commodities and commodity-index linked securities may be affected by changes in overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The above targets are estimates based on certain assumptions and analysis made by SSGA / Third Party. There is no guarantee that the estimates will be achieved.